There is nothing inherently wrong with an investment adviser’s purchase of services from an affiliated entity with its own money. An adviser should be cautious, however, when client funds are used for that purpose. In a recent settled SEC enforcement proceeding, the SEC claimed that an investment adviser used clients’ soft dollars to purchase investment software from a company controlled by the firm’s chief investment officer without disclosing that conflict of interest to its clients. This article analyzes the SEC settlement order. For another recent SEC action involving conflicts of interest, see “Advisers Must Disclose Conflicts of Interest and Heed the Terms of Client Agreements, or Risk Stiff SEC Sanctions” (Jun. 28, 2018). See also “Eight Bad Excuses Fund Managers Have Raised Trying to Avoid SEC Sanctions for Fee and Expense Allocation Violations and Undisclosed Conflicts of Interest” (Oct. 13, 2016).