FINRA Says that Handling Fees are Commissions
FINRA fined five broker-dealers for mischaracterizing (in trade confirmations and fee schedules) certain transaction-based fees as administrative or handling fees rather than commissions. The firms charged per transaction handling fees of $65 to $99 per trade. FINRA charges that the handling fees were “far in excess of the cost of the handling-related services” provided. The firms agreed to identify “all transaction-based remuneration as commissions or mark-ups” and to disclose the specific services performed.
OUR TAKE: We assume that FINRA takes the same view with respect to “administrative fees” charged to product sponsors for accessing distribution platforms. In other words, such fees are either distribution fees or commissions unless the firm can show that the fees are reasonable in relation to the administrative services provided.