Faith-Based Fund Family Swears off Soft Dollars

The Goshen , Indianafund firm said it was no longer comfortable with passing along the controversial soft-dollar expenses to investors, SocialFunds.com reported.

“Soft dollars are legal and accepted, but it doesn’t feel right any longer to ask shareholders to pay these costs as commission expenses,” said John Liechty, president of MMA Praxis Mutual Funds and senior vice president of financial services for Mennonite Mutual Aid (MMA), an Anabaptist organization that practices faith-based financial stewardship. “We are primarily sending the message that we’re ready to absorb these research expenses as a cost of doing business and no longer pass them along as commission expenses to investors.”

Massachusetts Financial Services (MFS), beleaguered by market timing improprieties, recently announced would also cease soft-dollar use (See  MFS Unveils “New Standards” ). The US Securities and Exchange Commission (SEC) is currently considering rule changes to further restrict “safe harbor” boundaries for soft dollar use – for example by excluding computer-related expenses or publication subscriptions. Soft dollars have also been the topic of recent Congressional legislation (See  Senate Fund Reform Bill Would Kill 12b-1 Fees ).

MMA Praxis isn’t the only socially responsible fund firm to adopt the no soft-dollar policy, SocialFunds.com reported. “Domini does not pay soft dollars,” said Adam Kanzer, general counsel and director of shareholder advocacy for Domini Social Investments. The Calvert Group, Trillium Asset Management, and Pax World Funds all use soft-dollar arrangements within “safe harbor” limits, the report said.