Directed Brokerage Programs

A “directed brokerage” arrangement is one in which a client, such as a pension plan, mutual fund or other beneficial account owner, directs a money manager to execute trades for its account through a particular brokerage firm. In return for the commissions paid, the broker may provide services directly to the client or pay certain expenses of the client. Directed brokerage arrangements include expense reimbursement and commission recapture. Directed brokerage arrangements fall outside of Section 28(e) of the Securities Exchange Act of 1934 since the client, not the investment manager, directed the securities transaction.