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In addition to providing clients with essential information on these non-managed fee-based accounts, including an explanation of how costs are computed, NYSE member firms now must specifically monitor these types of accounts to determine if investor activity may warrant changing over to a traditional commission arrangement or other type of brokerage account.
“With an increasing number of investors considering fee-based accounts, it makes sense that customers are adequately informed of the risks,” said Richard G. Ketchum, chief regulatory officer, New York Stock Exchange. “If investors do select a fee-based account, firms must undertake periodic reviews to determine if the account remains suitable over time.”
An alternative to traditional brokerage accounts that charge commissions on trades, non-managed fee based accounts charge a fixed cost, or percentage of the account’s value, instead of commissions. These types of accounts do not include investment advisory services.
While non-managed fee based accounts are subject to long-standing NYSE rules governing investment suitability and supervisory review, their unique features requires specifically tailored oversight. A non-managed fee-based account may be appropriate for customers who trade frequently, as the cost per trade declines as the number of trades rises. A non-managed fee-based account may not be appropriate for customers who expect fewer trades. For this type of customer, greater cost efficiency might be realized in a traditional pay-per-trade commission structure.
To read Information Memo Number 05-51 issued to NYSE Members and Member Organizations on July 26, 2005, click here or visit nyseregulation.com and click on Information Memos on the left-side navigation.
About NYSE Regulation
On December 17, 2003, the SEC approved a new governance structure for the NYSE. Under the new design, the NYSE Board of Directors is comprised solely of independent directors, except for the chief executive officer, who have no affiliation with any regulated member firm. A new position of chief regulatory officer was created and reports directly to the board of directors through a new Regulatory Oversight Committee. As a result, NYSE Regulation is insulated from potential influence from NYSE members and member firms, operates separately from the business side and is independent in its decision-making.
NYSE Regulation plays a critical role in monitoring and regulating the activities of its members, member firms and listed companies, as well as enforcing compliance with NYSE rules and federal securities laws. Nearly 400 of the largest securities firms in America are members of the New York Stock Exchange. These firms service 92 million customer accounts, or 90 percent of the total public customer accounts handled by broker-dealers, with total assets of over $3 trillion. They operate from 19,000 branch offices around the world and employ 146,000 registered personnel. Nearly 700 employees, or more than 40 percent of the Exchange’s staff, work for NYSE Regulation, which consists of four divisions: Market Surveillance, Member Firm Regulation and Enforcement and Listed Company Compliance, as well as a Risk Assessment Unit and Dispute Resolution/Arbitration.
