2. Jonathan is fund manager of Hedgehog Capital Management (HCM), an investment adviser providing investment advice to four affiliated hedge funds as well as separate client accounts. This Case explores Jonathan's use of soft dollar credits. HCM accumulates and uses soft dollar credits primarily at a single broker/dealer through equity and options trading for the HCM funds and individual client accounts. HCM discloses allowable uses of soft dollars through its regulatory filings and offering memorandum for HCM funds. The disclosures provide that soft dollars may be used for "overhead expenses," including "office services, equipment, and supplies." HCM rents a portion of Jonathan's personal residence to conduct its business. HCM pays $15,000 in rent to a company Jonathan owns, which, in turn, pays $14,400 to a local bank to cover the monthly mortgage payment for the property. Eventually, HCM and Jonathan request that the broker use soft dollars to make the rental payment. Once the broker starts paying rent using soft dollars, Jonathan raises the rent first to $25,000 per month and then to $37,500 per month.

a) Explain what soft dollar credits (or soft dollars) are according to Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission [3 marks] 4 of 10 b) State which CFA Institute Standard(s) of Professional Conduct that this case may involve. Explain in detail. [3 marks] a) Explain what soft dollar credits (or soft dollars) are according to Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission [3 marks] 4 of 10 b) State which CFA Institute Standard(s) of Professional Conduct that this case may involve. Explain in detail. [3 marks]