Spitzer moderates stance on contingent commissions
The blanket ban on contingent commissions or Placement Service Agreements (PSAs) imposed by New York attorney general Eliot Spitzer following his 2004-2005 investigations into the major US brokers have been moderated.
According to a filing with the Securities & Exchange Commission (SEC), Marsh & McLennan Companies Inc revealed that the firm would now be able to charge contingent commissions when it acts as a managing agency on behalf of a sole insurance company.
The original settlement agreement did not distinguish between the role of broker/producer, where an intermediary acts as the agent to the insurance buyer, and Managing General Agency, where the firm acts as an agent to the insurance company.
The agreements with other major US firms, such as Aon Corp, Willis Group and AJ Gallagher & Co, are also likely to be moderated. Marsh was the first broker to settle with Spitzer when it agreed to pay $850mn on 31 January 2005 in a restitution settlement for abusive market practices such as price fixing/business steering.