Follows NASAA Report Uncovering Wide Disparity of Broker-Dealer Fee Disclosure Practices

WASHINGTON, D.C. (September 11, 2014) – The North American Securities Administrators Association (NASAA) announced today that it has convened a working group consisting of state securities regulators and representatives of Financial Industry Regulatory Authority (FINRA), the Securities Industry and Financial Markets Association (SIFMA) and the Financial Services Institute (FSI) to develop improved broker-dealer fee disclosure.

“We look forward to working collaboratively with the industry and FINRA to achieve more meaningful disclosure of broker-dealer fees,” said Andrea Seidt, NASAA President and Ohio Securities Commissioner. “Investors have a right to know how much they are paying for these services. Our goal is to develop a model fee disclosure that is simple to read, easily accessible, and can be used effectively by investors to understand and compare fees.”

In connection with achieving its mission, Seidt said the working group will take in to consideration the different types of firms, including wirehouse firms, independent broker-dealers, clearing firms, and introducing firms, among others. The working group will consider a variety of options, including but not limited to a model fee disclosure form, accessibility and transparency guidelines, uniformity in terminology and nomenclature of fees and recommendations on how to notify customers of fee changes. When exploring model fee disclosure, the working group will focus on several areas, including presentation, customer comprehension, and timing and methodology of fee disclosure.

The working group consists of the representatives from the NASAA Broker Dealer Section, FINRA, SIFMA, FSI as well as the following broker-dealer firms: Edward Jones, LPL Financial, Morgan Stanley, Prospera Services, Signator Investments Inc., and Wells Fargo Advisors.

The formation of a joint working group was among the recommendations of a report issued earlier this year by NASAA examining fee disclosure practices in the brokerage industry. The study uncovered disparities in how broker-dealers disclose the fees they charge their customers. While broker-dealers may be complying with the technical requirements governing fee disclosures, the NASAA report concluded that the disclosures lose their effectiveness when hidden in small print, imbedded in lengthy account opening documents, or varied in terminology that does not define the service provided.

“It is important that investors fully understand the fees associated with their accounts. We look forward to working with NASAA, SIFMA and FSI to explore ways to help investors better understand the fees they are paying,” said Robert Colby, FINRA’s Chief Legal Officer.

“Fee disclosure is an important issue, and we look forward to participating with NASAA, FINRA, and the other working group members in this important dialogue,” said Kenneth E. Bentsen, Jr., SIFMA president and CEO.

“FSI’s members understand the importance of constructive engagement with our regulators,” said Dale Brown, Financial Services Institute (FSI) President & CEO. “We support NASAA’s goal of providing transparency to investors through easily accessible and simplified disclosures.”

For More Information:
Bob Webster | Director of Communications


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