CALCULATING MARKUPS

On Wall Street, May, 2008 by Alan J. Foxman

Q.Can you tell me if there's a rule that governs how much a broker-dealer may charge for miscellaneous fees and ticket charges and whether expenses like rent for office space and other overhead expenses can be recouped by including them in such miscellaneous fees? -W.T., New York

A.In 1943, the National Association of Securities Dealers (NASD) adopted what has become known as the "5% Policy" to be applied to transactions executed for customers. The organization's Interpretive Memo IM-2440-1 explains that "the question of fair markups or spreads is one which has been raised from the earliest days of the Association. No definitive answer can be given and no interpretation can be all-inclusive for the obvious reason that what might be considered fair in one transaction could...

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