Bankruptcy Judge James Peck
So-called “soft dollars” are amounts allocated from brokerage commissions to pay for the research component of a broker-dealer’s range of services. They may be used to purchase research and brokerage services falling within the “safe harbor” parameters of §28(e) of the Securities Exchange Act of 1934as amended by the Securities Act Amendments of 1975. Akin to frequent flyer miles, “soft dollars” are a form of customer credit, not unrestricted cash, that can be freely spent. The trustee for the liquidation of Lehman Brothers under the Securities Investor Protection Actwith support from the Securities Investor Protection Corp.determined that claims against the Lehman estate based credits for customers in “soft dollar” accounts are not entitled to protection as customer claims under the act. Overruling objections to the trustee’s determination, bankruptcy court agreed with the trustee that “soft dollar” claims do not satisfy the definition of customer claims under the act and properly should be allowed as unsecured claims against Lehman. Because “soft dollars” can never be used to purchase securities, they do not qualify for the enhanced customer protection afforded by the act.
