Members of the Financial Services Institute Inc. met with members of Congress and their staffs on Capitol Hill Oct. 10, in a push to retain in their current form 12(b)-1 fees, which the advisers say are crucial to their work with smaller clients.
The Securities and Exchange Commission is considering altering the structure of the fees, and SEC Chairman Christopher Cox has even mentioned the possibility of eliminating them.
That prospect worries the industry. The FSI, which is based in Atlanta and represents independent-contractor broker-dealers, has been telling policymakers that the fees allow the industry to serve smaller investors.
During the institute's "Capitol Hill Day," 18 teams of members from 26 states and the District of Columbia met with 83 representatives, senators and staff members to describe the potential impact "on middle America" if 12(b)-1 fees were eliminated, said FSI chief executive and executive director Dale Brown.
"We may have been able to provide a perspective that they may not have heard before," he said.
Members made meeting representatives from the House Financial Services Committee their top priority.
Investors would pay higher fees without 12(b)-1s, said Mike Mungenast, president of ProEquities Inc. in Birmingham, Ala., one of the FSI members who traveled to Washington, describing the main thrust of the lobbying group's argument. "The other [result would be that] the rep abandons the account and the client has to call an 800 number" for second-rate advice, he said.
Mr. Brown and Mr. Mungenast said they felt the message had been heard. "Anytime you get before [your elected representatives and] show them you're reasonable people who want reasonable results, that will have a positive impact," Mr. Mungenast said.
SEC spokesman John Heine said the commission's staff is still reviewing comments on the 12(b)-1 issue. "We haven't said anything about [elimination of 12(b)-1s] being on or off the table," he said.
But the advisers feel that the recent lobbying may have made a difference. "Based on what I hear, we've had success in making a strong case that elimination of 12(b)-1 fees would not be beneficial to anyone," Mr. Brown said.
The question now is what additional changes or reforms the SEC might propose, Mr. Brown said. "We want meaningful disclosure, not just more paperwork," he said.
Also that day, at a hotel in Washington, the FSI held a meeting with policymakers. Erik Sirri, the Securities and Exchange Commission's director of market regulation, ad-dressed attendees.
It also held a panel discussion featuring Mary Schapiro, CEO of the Financial Industry Regulatory Authority Inc. of New York and Washington; FINRA board members John Simmers, chairman of the FSI and chief executive of ING Advisors Network Inc. in Atlanta; and Richard Brueckner, chief executive of Pershing LLC of Jersey City, N.J.
Dan Jamieson can be reached at [email protected].
