In an August Notice to Members (97-50), the NASDR is requesting comment regarding the "appropriate regulation" of various forms of compensation paid in the sale of funds and variable annuities.
The NASDR is considering requiring some type of disclosure or regulation of "revenue sharing" arrangements between product vendors and firms, and "differential commission payments" for registered reps on proprietary products or via sales contests and bonuses. The regulator is asking if these practices are "harmful or beneficial to customers or the industry." (For more on revenue sharing deals, see "The Secret World of Access Fees," RR, March '97, Page 66; and "OddLots," RR, Jan. '97, Page 32.)
The NASDR's notice says that its Conduct Rule 2830(1) already requires disclosure in a mutual fund's prospectus of "special compensation arrangements" made available to individual dealers. But what that covers isn't defined in the rule, "and members have interpreted the term differently," the notice says, including no disclosure at all of revenue sharing arrangements.
Variable annuities are not covered under Rule 2830.
The release can be viewed at www.nasdr.com/2520.htm
