From: Kevin P. Takacs |
Dominion Investor Services, Inc wishes to provide the following comments to proposed rule changes affecting point of sale compensation disclosures. Dominion does not support additional registered representative to client point of sale disclosures due to the possible negative impact to both interested parties to the sale. Compliance professionals (such as this author) will likely always view additional disclosure as a positive enhancement to the industry. However, several other “required” disclosures over the past several years have already led the industry to disclosure overload and we are now considering making the sales process even more complex, form-intensive and detail oriented. Disclosing the dollar amount of sales charges can also be unfair to the sales representative in the field, as only a portion of the total dollar amount is actually paid to the representative. Some of the compensation is paid to the broker-dealer and some is paid to the complex. We risk painting an inaccurate picture of sales rep in the prospect’s mind here. Certainly this is not the intent of the proposed rule but is a likely undesired by-product. Failure to disclose sales charge information has not been a major subject of investor complaints at this firm. Is there a possibility that we may be trying to fix something that does not require repair? No other industry to our knowledge is required to make such disclosure right down to the dollars and pennies involved. At some point the industry needs to step back and determine whether or not we are attempting to stifle the very nature of our business – selling securities. Eventually good investment decisions that should be made with executed sales are going to lead to missed opportunities for both the client and the firm. Clients already don’t read most of the information provided to them at a typical sales presentation. What is really needed by the client is less information that is more useful and informative on a per word basis. Sales representatives are already required to make oral disclosure on investment risk, share classes’ available, breakpoint pricing and provide the client with a prospectus for each fund recommended. Disclosing the sales charge as a percentage of the dollar amount invested should remain sufficient point-of-sale disclosure. Dominion does support reinforcing the required point-of-sale disclosure with a gross “dealer concession dollar amount” disclosure printed on the fund/account confirmation statement sent to the client. Some mutual fund complexes have already adopted this policy successfully. Dominion also supports prominent disclosure language on the front cover of prospectuses indicating that sales charges apply to this product and refer to the pages therein and the fund complexes website where additional information about sales charges can be obtained. Not long ago our application was three pages long. Today, it is eleven pages long. Why? We have been required to add disclosures about (1) disaster preparedness; (2) patriot act; (3) privacy policy, (4) arbitration agreements and (5) additional suitability data gathering. The point of sale process needs to be focused on getting the clients into investments that will benefit them and ensuring that the client understands the risks involved. We agree that the representative must disclose that they will receive compensation should the client purchase the recommended product. Additional point of sale disclosures, if any, need to brief, accurate and to the point. Another “form” among a series of possible forms is not the answer. “Form excess” has already been exceeded. Thank you for reviewing our opinion. Kevin P. Takacs |