Finra puts onus on clients to find broker recruitment incentives
A revised Finra proposal on broker compensation when switching firms puts the responsibility on clients to determine what kind of recruiting incentives their financial advisers received.
The board of the Financial Industry Regulatory Authority Inc., the industry-funded broker regulator, on Friday authorized the organization to put out for public comment a proposal that would 'require a recruiting firm to provide a Finra-created educational communication' to clients of the broker who are weighing whether to transfer their assets with him or her, according to a document from Finra Chairman and chief executive Rick Ketchum posted on Finra's website.
The 'educational communication' would suggest questions clients should ask their brokers 'to make an informed decision' before following them to a new firm, according to the document.
Those queries would relate to costs the customer could incur, investments that may not transfer and financial incentives the broker is receiving that could encourage him or her to persuade clients to make the move.
The revised broker compensation proposal makes illuminating recruiting incentives a do-it-yourself proposition for investors. That's a significant change from the original proposal, which would require brokers' new firms to outline compensation packages in excess of $100,000 to clients from their previous firms.
In June, Finra withdrew the original proposal from the Securities and Exchange Commission, where it was awaiting SEC action. Finra received 184 comment letters on the original proposal. Critics citied worries about implementation and a lack of clarity about what information had to be disclosed.
Finra did not indicate when it would release a regulatory notice and more detail about the revised rule.
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