The insurance industry and regulators are clashing over a proposal of the National Association of Securities Dealers to expand non-cash compensation prohibitions to include the sale of all types of securities.
Rules at the NASD, Washington, now prohibit payment and acceptance of non-cash compensation such as entertainment and travel expenses in connection with the sale of direct participation programs, variable insurance contracts and public offerings of real estate investment trusts. The new rules would expand the prohibitions to include all securities.
William Galvin, Massachusetts secretary of the commonwealth, says the proposal could go even further by more precisely defining those forms of non-cash compensation that would still be allowed.
For example, the NASD could replace the vague current standard on entertainment with a dollar limit, Galvin writes in comments to the NASD.
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“Non-cash compensation is often invisible to customers who certainly would want to know if such compensation is being paid to the broker and the amount paid,” Galvin writes.