The crux of the problem, Thompson contends, is that consumers don't know what to ask for when it comes to compensation conflicts of interest or how such conflicts can affect their bottom line. That makes burying such information in a general prospectus disclosure even more problematic.

Others less than wowed by the NASD proposal also note that it's not even an original proposal, but reaction to clean-up legislation (the Mutual Funds Integrity and Fee Transparency Act) introduced by Rep. Richard Baker (R-La.) this past summer. Baker caught on early to the ongoing fund scandals being uncovered by state officials, most notably New York State Attorney General Eliot Spitzer.

To its credit, the NASD has brought some high-profile cases. It censured and fined Morgan Stanley $2 million for conducting prohibited sales contests to entice brokers and sales managers to sell more of the firm's own brand of mutual funds. Morgan Stanley paid more than $1 million in prize inducements, including NBA tickets and resort trips.

"The main problem has not been a lack of rules," NASD Chairman and CEO Robert Glauber told compliance officers at the NASD's most recent securities conference. "It has been lack of compliance with the rules."

But if that is the case, why is the NASD writing this new rule in the first place? And why has the self-regulatory organization taken such a different tack from its regulatory parent, the SEC? Under the SEC proposal, broker-dealers would make disclosures of "transaction-specific" costs in two new forms. One would be given or read to an investor before they plunk their money down; the second would be sent in the form of a confirmation statement, again explaining exact consumer costs.

In a request for investor comment, the SEC said the forms are designed to "tell you how much you must pay when you buy a particular fund and how much your broker and the firm will receive for selling that fund." The agency, which is also proposing that 12-b-1 fees be deducted directly from shareholder accounts, has asked if the fees should be outlawed altogether.

The SEC said it will consider the NASD's proposal "in the event that the NASD submits it," noting that it contains general explanations that complement the SEC's own proposals.

While SEC staffers, like enforcement chief Stephen Cutler, have expressed "outrage" over the fund problems that have been brought to light, one wonders why in the face of such widespread wrongdoing the SEC staff is still talking about going forward with its proposal to make permanent the exemption from fiduciary laws it currently gives to brokers? In February, former SEC Chairman Arthur Levitt, whose agency initially proposed the rule, told attendees at TD Waterhouse's institutional conference he was no longer in favor of it and intimated that several current SEC commissioners shared that view.

The upshot of the exemption is that reps won't have to put investors' needs first. "How can you not be irked by the difference in disclosure between reps and investment advisors?" asks Paula Hogan, president of Hogan Financial Management in Milwaukee, and a member of the National Association of Personal Financial Advisors compensation task force. "Why shouldn't the consumer know the price of our services? What else do you buy where the price is kept a secret?"

For her part, Hogan provides each client with a document that outlines her actual fees, the brokerage costs they've incurred, fund fees and expenses and the total client tab. But that's not the norm in the financial services industry. "If a bank manages your funds, you don't know what the expense ratios are. If you buy a bond, you don't know what the bid-ask spread is. You also don't know what kind of deals are going on behind the scenes to influence most brokerage deals," says Hogan.