February 21, 2004
In my particular circumstance, E-trade brokerage charged a fee to have a brokerage account. It was necessary to have the brokerage account with E-trade brokerage in order to own the E-trade fund. E-trade claimed the fund was a separate company from the brokerage and therefore this brokerage fee was not associated with owning the fund and was not a load or fund management cost. However, it was not possible to purchase or hold the mutual fund without having the brokerage account.
Your form does not specify such circumstances where brokerage firms charge account maintenance or other fees and those firms offer funds that are available only from those brokerage firms. This account maintenance fee then becomes, in essence, a fee for owning the brokerages or brokerages parent organizations mutual fund if that is what the investor is purchasing.
Your forms do not show affiliations. For example, if brokerage firm was a separately managed subsidiary of firm XYZ and firm XYZ had equity positions in firms that the brokerages mutual fund had positions in, then firm XYZ would benefit from the brokerage pushing sales of the fund. Additionally, if directors of the brokerage firm were also directors of firm XYZ which is likely, they would obtain personal compensatory benefit from directing the brokerage firm to push sales of the fund and could authorize financial renumeration for brokers who sold more of the fund. These types of conflict of interest disclosures are not in the form.
Good start,
Thanks
Richard Haimann.
16862 Blanton Street Unit M
Huntington Beach, CA 92649
714-465-3157