What does it mean if a product has both eligible and non-eligible uses in terms of Mixed-Use Soft Dollars?

When a product has both eligible and non-eligible uses concerning Mixed-Use Soft Dollars, it implies that the costs associated with the product need to be reasonably allocated between the eligible and non-eligible portions. This requirement ensures that only the appropriate portion of the expenses related to Soft Dollar benefits is funded through Soft Dollar arrangements, which are typically used to pay for services that assist in the research or investment decision-making processes.

The need for reasonable allocation stems from regulatory requirements, as investment advisers must clearly differentiate which costs are associated with eligible uses that qualify for Soft Dollar treatment versus those that do not. Failing to appropriately allocate these costs could lead to improper use of Soft Dollar benefits, which can attract regulatory scrutiny and potentially fines.

Understanding the distinction in eligibility allows firms to comply with regulations while utilizing Soft Dollar arrangements effectively. Therefore, the requirement emphasizes transparency and accountability in the accounting practices under which investment advisers operate.