Exchange Fund Investment (EFI) has resolved its dispute with brokers on the commission structure for the Tracker Fund which is to be launched on Monday. Brokers had warned they would not promote the fund unless they received a higher commission. The Hong Kong Stockbrokers Association (HKSA) yesterday announced the Government had agreed to a new arrangement in which the stock exchange's 500 brokers would receive a 1.5 per cent commission on their fund sales. Under the original commission structure, only 16 designated retail brokers were to receive a 1.75 per cent commission to be paid by the Government. Other brokers were to be paid an undefined cash rebate from one of the 16 brokers in addition to a 1 per cent commission to be paid by their clients. Brokers said the new commission structure would encourage them to promote the fund. 'The new arrangement would ensure a smooth start-up for the launch of the fund,' one broker said. 'I think this is a fair solution.' The HKSA last week complained to EFI and the Hong Kong Monetary Authority that the commission structure was unacceptable and unfair. Some brokers also warned they would not promote the Tracker Fund unless the commission arrangement was improved. The fund was saved a rocky opening after a week of negotiations. The HKSA yesterday sent a letter to brokers explaining a compromise plan that was hence deemed acceptable to it, the HKMA and the 16 designated brokers. Under the new arrangement, the Government would still pay the 1.75 per cent commission to the 16 designated brokers. The designated brokers would keep 0.25 per cent as a service charge for the collecting of subscription applications and pass the rest on to brokers. As a result, most brokers would receive a 2.5 per cent commission on their Tracker Fund sales, including the 1.5 per cent Government commission and 1 per cent client commission. This is higher than normal stock transactions in which brokers usually receive a 0.25 per cent minimum commission from clients. The Tracker Fund is the first step in the Government's plan to dispose its $200 billion share portfolio purchased during the market intervention last year. TRACKER FUND
