A selling commission is the upfront compensation paid to the broker-dealer — and through it, the financial professional — for selling shares in an offering, expressed as a percentage of the purchase price. In non-traded products it is the core component of the sales load, and the economics that historically defined the channel.
How selling commissions work
In the legacy non-traded REIT model, selling commissions ran up to 7% of gross proceeds, paid to selling broker-dealers and shared with representatives, atop dealer manager fees — the structure behind the era’s ~10%+ total loads and the gross-to-net hole investors started in. The modern share-class system repriced rather than removed the concept: Class S/T upfront loads (commonly up to ~3.5%) are today’s selling commissions, paired with ongoing shareholder servicing fees that trail-compensate the same channel, while advisory Classes D and I strip commissions out for fee-based accounts. The guardrails: FINRA Rule 2310 caps total underwriting compensation (the 10% framework) in covered products, per-share caps trigger conversions to cheaper classes once cumulative compensation limits are reached, and Reg BI puts commission-driven recommendations — and share-class selection specifically — under best-interest scrutiny. For clients, the practical translations: the commission comes out of the investment (a 3.5% load means $965 of every $1,000 goes to work, before other costs), it is the visible tip of a compensation structure the prospectus’s plan-of-distribution section itemizes fully, and “no commission” in an advisory account means the compensation moved to the advisory fee, not that distribution became free.
Related terms
Sales Load · Shareholder Servicing Fee · Share Class · Dealer Manager · Net Proceeds
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