February 21, 1990
TO: SEC RULES MEMBERS NO. 14-90
RE: ALLEGED REQUESTS FOR IMPERMISSIBLE SALES COMPENSATION
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The SEC staff has advised the Institute of reports that
certain broker-dealers allegedly have advised mutual fund
organizations that they require "up front" cash payments as a
condition to selling fund shares.
We understand that the SEC and NASD staff believe that such
a solicitation or payment would constitute a violation of Article
III, Section 26 (l)(3)(A) of the NASD's Rules of Fair Practice,
absent disclosure in prospectuses, and may also raise other
disclosure issues.
Matthew P. Fink
Senior Vice President and
General Counsel