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US state regulators push to simplify brokerage fee disclosures

Monday, September 28, 2015 - 07:06

[SAN JUAN] A new type of disclosure about various fees that investors shell out to maintain brokerage accounts will promote a better understanding of those charges and provide a tool for comparing companies, US state securities regulators said on Sunday.

The model fee disclosure, introduced on Sunday by the North American Securities Administrators Association (NASAA), aims to standardise how US firms present information about everything from annual brokerage account fees to charges for falling below minimum balances.

Service and maintenance fees have long been a source of confusion for investors. Among the problems: there is little consistency among companies about how they disclose such fees, which some may also charge for postage and transferring accounts to other firms.

NASAA, a group of securities regulators from US states, Canada and Mexico, unveiled the new standardised disclosure format at its annual meeting in San Juan, Puerto Rico.

The group collaborated with securities industry trade groups and Wall Street's industry-funded watchdog, the Financial Industry Regulatory Authority (FINRA), among others, to develop the simplified format.

NASAA officials, who have studied disclosures from thousands of companies since last year, found that some firms had buried the information within 40-page documents, while others used charts that did not make sense, Carol Foehl, associate director of the Massachusetts Securities Division, in a presentation about the group's project. "If this exercise was difficult for the regulators, how was the average investor supposed to find the information?" said MS Foehl.

Many investors are unaware that their brokerages charge fees to maintain and service brokerage accounts. Nearly 30 per cent of almost 1,100 investors who participated in a recent NASAA survey said their firm did not impose such charges. Another 25 per cent said they did not know whether they were being charged.

More than half of investors who were aware of the fees did not know the amounts their firms charged, NASAA said.

The model disclosure, which is voluntary for companies, is a plain-language document designed so that investors can easily eyeball the amounts for different types of service and maintenance fees, as well as their frequencies.

NASAA recommends that companies include a link on their website home pages that directs users to the disclosure.

REUTERS

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