Earlier last year, the MFDA published proposed rules to require a Dealer Member to inform clients of any fees or charges to be deducted, while also requiring the Member to maintain evidence that the client was so informed. The comment period expired in September and we now await confirmation, which is expected early this year.
Types of Fees Covered by the Proposed Rule
The proposed rules will capture direct transaction charges but not indirect charges, such as trailing commissions.
What does this mean?
By meeting these requirements, Dealer Members will be in a better position to defend alleged disgorgement of fees, churning and in some cases alleged unauthorized trading allegations. The key will be the effective implementation of controls to ensure compliance with the rules.
