As a result of the vote to implement the interpretive guidance, now an asset manager can only pay for two things - execution services and research services and there are clear definitions as to what execution services are and as to what research services are, Mayhew says. For instance, research services should provide original thought and analysis.

Based on listening to the SEC's staffers comment on the proposed guidance during the open meeting, some items that were considered research in the past, including computers, connectivity, travel and entertainment expenses would not be eligible for protection under the 28(e) safe harbor, said Mayhew in the blog.

"You can't pay for computers, the connectivity for the computers, but you can pay for the software if it specifically helps you either with execution or with your investment process," says Mayhew in today's interview.

According to Mayhew's blog, however, market data services, certain investment related seminars, and even "mass market" services such as newspapers, magazines and newsletters would be allowable.

Commission Sharing Agreements

While there were no surprises in the 5-0 vote, however, one new item that came up for discussion was commission-sharing agreements (CSA).

"I think folks in the U.S. are trying to get a handle on what the SEC's views of CSA agreements are specifically and how they may be used in the U.S. context compared to the U.K.," says Mayhew. The U.K. money managers are aggressively using commission-sharing agreements to facilitate unbundling. They disclose to their pension funds how much of their commissions are being used for executions and how much are being used for research, he says.

For example, a U.K. money manager might tell the broker, "Last year I paid you $10 million in commissions. This year I'll pay you $5 million in commission for executions and $2 million for your research, and the additional $3 million to pay another research firm." That other research firm could be another broker or an independent research provider.

In the U.S., Mayhew says, there hasn't been this same level of disclosure, from the buy-side to its pension fund clients or from the sell-side to the buy-side.

So what can the industry expect to happen next? Mayhew says the SEC won't implement the proposed guidelines until the beginning of 2007. From now until the end of the year is just the waiting period for it to be implemented.