The judge also noted that more than 10 percent of the funds invested were used to compensate brokers that sold the partnerships, in violation of the offering plan.

Banks say this is an accepted way to compensate brokers that generate loans for them.

Sales loads typically are used to compensate brokers or others who sell mutual fund shares.

Another is the way funds make existing shareholders compensate brokers for selling the funds to new investors.

But he added that the cost of compensating brokers for switching their clients to lower-priced accounts was the primary reason that Merrill's compensation costs rose in the third quarter.

The funds typically carry a load, or sales charge, which is used to compensate brokers for their sales efforts.

The service fee is supposed to compensate brokers for giving customers continuing advice and keep them from churning accounts to collect new fees.

Front-end Load an upfront sales charge investors pay when they purchase fund shares, generally used by the fund to compensate brokers.

But in 1993, to be more like a full-service firm, Olde started compensating brokers with handsome commissions.

Sales charges are used to compensate brokers and other fund sellers; raising them can serve as a powerful sales incentive.