The Association for Investment Management and Research said today it supports requiring expanded disclosure and client consent to all “directed brokerage” arrangements. In such arrangements, fund companies sometimes direct their trading business to brokerage firms to reward them for selling their funds.

AIMR also released the results of a member survey that found that 61% of respondents believe directed brokerage arrangements should be permitted only with specific, required disclosures.

AIMR, which oversees that Chartered Financial Analyst (CFA) designation, issued the statement in response to the Securities and Exchange Commission’s recent investigations of directed brokerage arrangements in the mutual fund industry.

In a statement, AIMR said that mutual fund shareholders not only should receive complete, specific and clear information on how their commissions are being spent, but also should be required to affirmatively consent to any directed brokerage arrangements.


It added that, mutual fund companies cannot select the best broker to execute a trade if either it or the selected brokerage firm puts its own profitability and its own interests ahead of the interests of the investing client. Brokers, too, have a responsibility to ensure that the funds they sell to clients are the most suitable investments to meet their needs, not based on whether they have a directed brokerage agreement with the fund.

In the AIMR survey, conducted in early to mid January, respondents said they believed increased regulation of directed brokerage would: reduce conflicts of interest; Increase objectivity and investor-focus; and overcome a perception of self-dealing.