Quick Answer
Charges for services beyond commissions and mark-ups, such as collecting money due on principal, dividends, or interest, transferring securities, or providing safekeeping and custody, must be reasonable and applied without unfair discrimination among customers. The standard is a reasonableness test evaluated on the facts, not a fixed dollar cap.
A portfolio's real cost to a customer is not only its commissions and mark-ups. This section covers the standard that governs everything else a firm charges for.
What Kinds of Charges Does This Standard Cover?
- This standard applies to charges for services performed for a customer,
including, but not limited to, miscellaneous services such as:
- Collection of monies due for principal, dividends, or interest
- Exchange or transfer of securities
- Appraisal, safekeeping, or custody of securities
- Other services of the same kind
- The rule carries two open-list markers in one sentence, so those examples never close the list.
- Those charges, whatever they are, must be reasonable and not unfairly discriminatory among customers.
- The trade itself is priced under a different rule. The fair-pricing and commission rule, covered in the best-interest and suitability unit, governs the price a firm charges as principal and the commission or service charge it takes as agent on the transaction. That is where the split comes from.
Why Does an Ancillary Fee Standard Belong in a Unit About Portfolio Risk?
- A portfolio's real cost to a customer is not only its commissions and mark-ups. Ancillary service charges, such as a safekeeping or transfer fee, are a cost too, and this standard caps that cost at a reasonable, evenly applied level rather than at a specific dollar schedule.
Exam Tip: Gotchas
- This standard sets a reasonableness and non-discrimination test, evaluated on the facts, not a specific fee cap. Sort a charge by which rule prices it: the fair-pricing rule governs the price or commission on the trade itself, and this standard governs the charges for the other services a firm performs.
What Should You Check on Exam Day?
- Sort a fee into the right bucket before answering: safekeeping, transfer, and collection charges fall under this reasonableness standard, not the mark-up disclosure rule.
- Do not look for a fixed dollar cap in a fact pattern testing this standard; the test is reasonableness and even application across customers.
- Confirm the charge is compared against similarly situated customers, not against a universal number.