An investment adviser directs client brokerage to a firm that provides research reports and also pays the adviser's office rent. Regarding these soft dollar arrangements, the adviser:

Explanation

Soft dollar benefits are acceptable only when they consist of research or brokerage services that assist the adviser's investment decision-making for clients, and the arrangement must be disclosed because it creates a conflict in the choice of executing broker. Payments for ordinary business overhead such as rent, salaries, or travel are outside the safe harbor and amount to using client commissions for the adviser's benefit. Client commissions are a real cost, so the claim that nothing extra is paid is false.