Which policy applies to commission charges on agency transactions?

The 5% policy is applicable to commission charges on agency transactions in the securities industry. This guideline, established by the Financial Industry Regulatory Authority (FINRA), serves as a benchmark for fairness in the pricing of broker-dealer services. It asserts that the recommended maximum commission or markup on non-exempt securities transactions should not exceed 5% of the total transaction amount.

This policy is particularly relevant for transactions where a broker acts as an agent, facilitating trades for clients instead of holding the securities in inventory. The 5% policy ensures that clients receive reasonable and transparent commission rates, fostering a competitive trading environment while protecting investors from excessive fees. It’s essential for professionals in the field to understand this policy to ensure compliance and provide transparent pricing structures for clients' transactions.

Other options reflect varying percentages that do not align with established industry standards for agencies, which could lead to confusion about appropriate commission charges. Understanding the implications of the 5% policy is crucial for maintaining professional integrity and ensuring customer trust in brokerage transactions.