Disclaimer

The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.

 Skip to Content

Broker-Dealer Fee Disclosure Under Microscope
December 22, 2014

In September, state securities regulators formed a working group aiming to make broker-dealers’ disclosures about their fees more clear, accessible, and useful to investors in comparing different firms’ charges. The group plans to finish its work by next fall, and will consider, for example, developing

  • a model fee disclosure form;
  • guidelines on accessibility, transparency, and uniform use of terminology; and
  • recommendations on how to notify customers of fee changes.

In addition to representatives of the North American Securities Administrators Association (NASAA), the working group includes representatives of FINRA, the Securities Industry and Financial Markets Association, the Financial Services Institute, and several broker-dealer firms. NASAA President Andrea Seidt said “the working group will take into consideration … wirehouse firms, independent broker-dealers, clearing firms, and introducing firms, among others.”

Earlier this year, a NASAA report on its survey of 34 broker-dealer firms recommended the working group’s formation. The survey found a wide disparity of broker-dealer fee disclosure practices. However, that survey, and certain enforcement actions that preceded and partially motivated it, focused particularly on certain problematic fee disclosure practices. For example, some firms allegedly hid the true amount of their compensation for securities transactions by charging unreasonable markups for what they disclosed as “handling,” “postage,” “delivery of securities in certificated form,” or “miscellaneous.” The survey also focused particularly on fees firms charge for closing accounts or transferring account securities to another firm.

Against this background, the working group may focus primarily on disclosure issues regarding a limited number of specific fee types. Alternatively, the working group may seek a more comprehensive approach.

In any case, some of the practices addressed by NASAA’s survey and the working group may involve legal violations. Broker-dealers would be well advised to review their own practices with that in mind.
Authored By
Image: Thomas C. Lauerman
Thomas C. Lauerman
Related Practices
Securities Litigation and Enforcement Securities Transactions and Compliance Financial Services Regulatory
©2024 Carlton Fields, P.A. Carlton Fields practices law in California through Carlton Fields, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.