The SEC fee is a small charge on certain securities sales to cover administrative costs, passed on to traders through brokers and dealers. It is a Section 31 transaction and is paid by industry regulators and markets. The fee is low and adjusted periodically, and brokers are required to disclose fees in advance.
A Securities and Exchange Commission (SEC) commission is a small fee associated with sales of certain types of securities to help cover SEC administration costs. Although known as the SEC fee, the commission does not apply or apply the fee to consumers; instead, it is a charge at the exchanges and regulatory organizations that is passed on to individual traders through their brokers and dealers. The amount of the SEC fee varies, but is generally very low.
Transactions subject to an SEC fee are known as Section 31 transactions, after the section of the Securities Exchange Act of 1934 that establishes this fee. Under legislation that created the SEC, the organization can collect a small percentage of stock sales and use this money for administrative expenses. Acting as a regulatory agency, the SEC reviews a wide variety of activities in the financial markets and has the authority to pass and enforce regulations. The money raised finances the activities of the SEC.
Industry regulators such as the Financial Industry Regulatory Authority (FINRA) are required to pay the SEC, as are individual markets such as the New York Stock Exchange. These entities pass the fee on to the brokers and dealers making transactions, and add the SEC fee to the transactions to cover the cost of the fee. The SEC adjusts the fee periodically according to the number of transactions that take place, to collect an appropriate amount of money under Section 31.
This fee is extremely marginal; For example, in 2007, it was 1% of 1/800 of every dollar. People who make very large transactions may notice the SEC fee, but for most people, the amount is so insignificant that it is not a cause for concern. By spreading the cost across numerous transactions, the fee is kept low enough to avoid penalizing investors making sales, while still allowing for the raising of sufficient funds to meet the needs of the SEC.
When people trade securities, they can obtain a list of associated fees from their brokers to use in estimating transaction costs. Brokers are required to disclose fees and policies in advance when people open accounts and can provide additional information to investors upon request. It is recommended that you keep this information in a safe place for future reference so that investors are not surprised by the fees assessed when transactions are made.
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