Which of the following is an example of a 'soft dollar' arrangement in Canada?

Question: Which of the following is an example of a 'soft dollar' arrangement in Canada?

Answer options: ✅ A portfolio manager directs client trades to a broker who provides free investment research to the manager.

• A client pays a fixed annual fee directly to the portfolio manager for their services.
• A portfolio manager receives a commission from a mutual fund for selling its units.
• A client agrees to waive their right to periodic performance reports in exchange for lower fees.

Correct answer: A portfolio manager directs client trades to a broker who provides free investment research to the manager.

Explanation: A soft dollar arrangement occurs when a money manager directs brokerage transactions to a broker who provides research or other services to the manager, typically at no additional cost to the client beyond the trading commissions. This practice is regulated in Canada to ensure client best interest.