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92-11 Fees and Charges for Services

SUGGESTED ROUTING:*

Senior Management
Corporate Finance
Legal & Compliance
Training
*These are suggested departments only. Others may be appropriate for your firm.

EXECUTIVE SUMMARY

Members are reminded of their obligation that all fees and charges for services must be reasonable and that adequate prior notice be given to customers.

DISCUSSION

Article III, Section 3 of the Rules of Fair Practice specifies that charges for services performed by members "shall be reasonable and not unfairly discriminatory between customers." In addition to being reasonable in nature, the NASD believes that customers must be provided with adequate notice prior to the member's implementation or change of a service fee. Members should provide written notification to customers of all service charges when accounts are opened, and customers also should be provided with written notification at least 30 days prior to the implementation or change of any service charge. Failure to do so could be construed as conduct inconsistent with just and equitable principles of trade under Article III, Section 1 of the NASD Rules of Fair Practice.

In a related issue, the NASD is aware that some firms have been, or are contemplating, charging fees for the transfer of customer accounts through the Automated Customer Account Transfer System (ACATS), in addition to charging for non-ACATS transfers. ACATS was designed to expedite the transfer of customer accounts between participants in a registered clearing agency. The system was intended to alleviate the demands on member firms imposed by the manual processing of customer account transfer and thereby reduce costs. The NASD is concerned about members charging fees unrelated to actual costs for account transfers through ACATS. Moreover, the NASD believes it is not appropriate to charge fees to customers for involuntary account transfers through ACATS occasioned by circumstances beyond the customer's control.

Questions concerning this Notice may be directed to Samuel Luque, Associate Director, Financial Responsibility, at (202) 728-8472.


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