A working group of North American securities regulators released a model fee disclosure schedule on Monday as part of an effort to help improve the transparency and comparability of brokerage fees.
Specifically, the North American Securities Administrators Association (NASAA) published the model fee disclosure schedule developed by a working group comprised of state securities regulators and representatives from the Financial Industry Regulatory Authority (FINRA), the Securities Industry and Financial Markets Association (SIFMA), the Financial Services Institute (FSI) and several financial services firms. The aim is to help investors better understand — and be able to compare — various broker-dealer service and maintenance-related fees and to make fee disclosure more transparent.
The new voluntary model calls for disclosure that includes all miscellaneous account and service fees, including account maintenance fees. It does not include commissions, mark-ups, or advisory fees.
The working group also developed guidelines to make fee disclosure more accessible and transparent for retail investors and reports that the broker-dealers that participated in the working group 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 notes. “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 effort follows NASAA research from 2014 that found a wide disparity in how broker-dealers disclose their fees and market research that was carried out earlier this year, which showed that investors are confused about the fees brokerage firms charge to service and maintain their accounts.
“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,” says William Beatty, president of NASAA and Washington Securities Director, in a statement. “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.”
“SIFMA was pleased to participate in this collaborative effort with NASAA, FINRA and the industry to promote transparency and investor understanding of miscellaneous broker-dealer fees,” adds Kenneth Bentsen, Jr., president and CEO of SIFMA, in the statement. “The voluntary template and investor access guidelines achieve these objectives, and we encourage firms to consider these components as they review their own disclosures.”