State regulators, Finra, SIFMA propose fee disclosure model for brokers

Groups say the approach would clarify charges to investors, yet commissions and advisory fees are excluded

Sep 28, 2015 @ 1:05 pm

By Mark Schoeff Jr.

Top players from around the financial services industry — state regulators, Finra, trade groups and three broker-dealers — proposed a fee disclosure model Monday they say would help clarify charges investors pay.

The online disclosure template would include the amount and frequency of brokerage fees related to account maintenance, cash management services and specific investments. The investment charges refer only to those imposed by broker-dealers, not by investment companies. The regulators and interest groups are encouraging broker-dealers to adopt the template.

The disclosure schedule does not include commissions, markups, commission equivalents or advisory fees.

“This has been a collaborative and voluntary effort between securities regulators and industry to promote accessible, standardized and transparent disclosure of miscellaneous broker-dealer fees,” William Beatty, North American Securities Administrators Association president and securities director for the state of Washington, said in a statement.

The schedule should be made available on a broker-dealer's public website, with a clearly identifiable link from the homepage, according to a report released by NASAA. There also should be a reference to the schedule in an internal search bar on the broker's website and through a simple Internet search, with a paper version available upon request.

The disclosure proposal was issued by a NASAA working group that was launched in the summer of 2014 with the goal of illuminating broker fees and making them easier to compare.

“Fee disclosure increases transparency for investors, but its effectiveness depends, in part, on the accessibility and prominence of the disclosure,” the NASAA report states.

But an investor advocate countered that the disclosure does not go far enough because it leaves out many of the fees that contribute to an investor's total cost of doing business with a broker.

“This disclosure is a small, good step only if it's followed by a comprehensive disclosure requirement,” said Knut Rostad, president of the Institute for the Fiduciary Standard. “By itself, it covers so little in terms of total fees that it will cause confusion and it will create further distrust among investors.”

The state regulators targeted “miscellaneous fees,” according to NASAA spokesman Bob Webster.

“This is a significant first step toward raising investor awareness about the fees they are being charged,” he said. “Since its inception, the working group's focus has been to clear up the significant amount of investor confusion over a wide range of miscellaneous fees charged by broker-dealers.”

The NASAA working group was comprised of state regulators and representatives of the Financial Industry Regulatory Authority Inc., the industry-funded broker-dealer regulator, the Securities Industry and Financial Markets Association, the Financial Services Institute, LPL Financial, Morgan Stanley Smith Barney, Prospera Financial Services and Signator Investors Inc.


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