New FINRA Rule Would Require Point-of-Sale Disclosure of Mutual Fund Revenue-Sharing
FINRA has asked the SEC to approve a rule change that would require broker-dealer to disclose all revenue sharing payments received from mutual fund sponsors and their affiliates. The proposed new rule (2341 to replace 2830) would require point of sale disclosure with respect to any compensation received by a broker-dealer in connection with the sale of investment company securities. The disclosure would include the following: (a) that the BD has received compensation or has entered into an agreement to receive compensation; (b) that the compensation may influence which funds the BD recommends; and (c) a reference to a web page or toll-free number to get more information, which must include a description of the compensation, the list of preferred fund companies, and the names of the fund companies. The new rule would not apply to sales loads, 12b-1 fees, or shareholder servicing fees described in prospectuses.
OUR TAKE: FINRA could have waited for the broader point-of-sale disclosure that it has advocated, rather than focusing on investment companies. Nevertheless, the SEC filing indicates that FINRA is close to adopting the new rule.