NASAA: Survey Finds Inconsistent Broker-Dealer Fee Disclosure and Questionable "Markups"

The North American Securities Administrators Association ("NASAA") released a report indicating a wide disparity in how broker-dealers disclose fees, as well as questionable practices regarding broker-dealer fee charges and "markups."

(The "markups" in question are not on securities transactions, but rather on fees for services, such as providing a stock certificate, where the fee charged by the broker-dealer is significantly in excess of the out-of-pocket cost of furnishing the service.)

The report stated that, while broker-dealers may be complying with the technical requirements governing fee disclosures, 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."

NASAA noted that the survey was prompted by actions taken by state securities regulators in Connecticut involving inappropriate fees charged by broker-dealers. The Investment Products and Services Project Group within NASAA's Broker-Dealer Section conducted the survey by collecting select fee data from 34 broker-dealers starting in 2012.

Among other recommendations made by the report was the suggestion that NASAA work more closely with FINRA and the broker-dealer industry 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.

See: NASAA's Broker-Dealer Fee Survey.