Which item would NOT fall under soft-dollar compensation safe harbor?

• A. Telephone lines
• B. Office furniture
• C. Travel expenses
• D. Rent

Answer: (A)

Soft-dollar safe harbor covers payments made with client commissions for services that directly support the investment decision process—things like research services, data and analytics, and other inputs that advisers rely on to provide advice. A telephone line is just basic communications infrastructure; it isn’t a specific service or resource that enhances the research or analysis process by itself. It doesn’t deliver research, data, or analysis, nor is it a service provided by a broker-dealer to support investment decisions. By contrast, items like office furniture, travel expenses to meet with researchers or attend conferences, and rent for office space can be viewed as facilities and activities that enable the research and advisory work to be performed. When those kinds of expenses are tied to delivering or supporting investment advice, they fit the type of supportive services that can be covered under soft-dollar arrangements. So, the item that would not fall under the safe harbor is the telephone line, because it’s general infrastructure rather than a qualifying research or advisory service.