New Voluntary Guidelines to Help Investors Understand and Compare Miscellaneous Broker-Dealer Fees

WASHINGTON, D.C. (September 28, 2015) – The North American Securities Administrators Association (NASAA) announced today that a working group it convened consisting of state securities regulators, representatives of the Financial Industry Regulatory Authority (FINRA), the Securities Industry and Financial Markets Association (SIFMA), the Financial Services Institute (FSI), LPL Financial LLC, Morgan Stanley Smith Barney LLC, Prospera Financial Services, and Signator Investors, Inc. has developed a model fee disclosure schedule to help investors better understand and compare various broker-dealer service and maintenance-related fees and guidelines to make fee disclosure accessible and transparent.

“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,” said William Beatty, NASAA President and Washington Securities Director. “I commend all of the parties that have worked to develop this template and applaud the firms that have committed to using this template for the benefit of investors.”

“FINRA was pleased to participate in this collaborative effort and believes that the product of the Working Group will promote better understanding and comparison of fees paid by retail investors,” said Philip Shaikun, FINRA Vice President, Office of General Counsel.

“SIFMA was pleased to participate in this collaborative effort with NASAA, FINRA and industry to promote transparency and investor understanding of miscellaneous broker-dealer fees,” said Kenneth E. Bentsen, Jr., SIFMA president and CEO. “The voluntary template and investor access guidelines achieve these objectives, and we encourage firms to consider these components as they review their own disclosures.”

“FSI members are committed to transparency in the fees paid by investors for the array of services they receive from financial advisors and firms,” said Dale Brown, FSI President & CEO. “We appreciated the opportunity to be a part of this working group. It is an example of how all of us – both regulators and the industry – can come together to collaboratively develop solutions and ultimately better serve investors.”

In a report released today, the Working Group unveiled a voluntary model fee disclosure schedule as well as specific parameters for its use. The table can be customized to be consistent with a firm’s branding and should include all miscellaneous account and service fees, including account maintenance fees. It does not include commissions, mark-ups, commission equivalents, or advisory fees.

In addition to the model fee disclosure schedule, the Working Group developed a series of guidelines to make fee disclosure readily accessible and transparent for retail investors, both online and offline. The broker-dealer firms within the Working Group have adopted and are in the process of implementing both the model fee disclosure and the investor access guidelines.

“Fee disclosure increases transparency for investors, but its effectiveness depends, in part, on the accessibility and prominence of the disclosure,” the report said. “The Working Group encourages other broker-dealers to voluntarily adopt and implement the model fee disclosure and accessibility standards as a sound business practice.”

The Working Group was formed in 2014 following the release of a study by NASAA’s Broker-Dealer Section uncovering a wide disparity in how broker-dealers disclose the fees they charge customers. Earlier this year, NASAA released the results of a national opinion research poll that found investors are confused about the fees charged by brokerage firms to service and maintain their accounts. The group worked throughout 2015 to develop meaningful miscellaneous account and service fee disclosure and transparency that is simple to read, easily accessible and can be used effectively by retail investors to understand and compare fees.

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Bob Webster | Director of Communications
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