William T.

George
P.O. Box
Encino, CA 91426-0437
May 22, 2008

The Honorable Christopher Dodd

Chairman
Committee on Banking Housing and Urban Affairs
United States Senate
448 Russell Building
Washington, DC 20510

Subject: Section 28(e) of the Securities Exchange Act of 1934 and Soft Dollar Brokerage

Dear Chairman Dodd:

Chairman of the SEC, Christopher Cox sent you a letter on May 17, 2007, in that letter Chairman Cox
urged the Senate Banking Committee to consider legislation that would repeal or substantially revise
Section 28(e) of the Securities Exchange Act of 1934.

Because the prospect of fair and equal enforcement of Section 28(e) across all types of institutional
brokerage arrangements seems very remote at this point, I believe it would be appropriate for the Senate
Banking Committee to reconsider Chairman Cox’s request as soon as possible.

As the committee considers whether to repeal or revise Section 28(e), I believe it would be appropriate to
consider the history of Section 28(e) and ask questions about the unequal enforcement of the regulation. I
believe the SEC has focused disproportionate regulatory attention on institutional third-party brokerage
firms, which provide advisors with independently produced research, while not focusing nearly as much
regulatory attention and regulatory resource on regulating full-service brokerage firms which offer bundled
undisclosed proprietary services in exchange for institutional advisors’ clients’ commissions “paid-up in
excess of the fully-negotiated execution related costs”.* After more than 33 years of Section 28(e)
enforcement the absence of any standards or guidelines for constructive identification or disclosure of the
uses of the fiduciaries’ clients’ brokerage commissions in bundled brokerage arrangements begs the
question, how can Section 28(e) be equally enforced?

I believe the SEC’s recent interpretation of a new category of commission sharing arrangements, which the
SEC has dubbed Client Commission Arrangements (CCA’s), further jeopardizes the sanctity of institutional
clients’ brokerage commissions and threatens the vigor of independently produced research, because in the
CCA the executing broker is not obligated to identify, price or disclose proprietary services provided. And
apparently the executing brokers’ unidentified proprietary services have commission payment priority.

For 2006, estimates by reliable sources put soft dollars at approximately 13 billion dollars of institutional
investors’ brokerage commissions. In the interest of investor protection it seems reasonable that fiduciaries
be required identify and disclose the uses of these commissions to assure they were used for the direct
benefit of the institutional account owners that paid the commissions.

Sincerely,

William T. George

*The definition of brokerage soft dollars