Finra to consider new disclosure rule

Board considering requiring disclosure of recruiting incentives to clients

Nov 28, 2012 @ 6:02 pm

By Dan Jamieson

Finra, regulation, broker-dealers
+ Zoom
Regulator looking into firms' bonus operandi

The Financial Industry Regulatory Authority Inc. is considering a rule change that would require disclosure to customers of broker recruiting incentives.

“The Board will consider a proposed rule that would require disclosure to transferring customers of recruitment compensation packages offered to induce registered representatives to move from one firm to another,” Finra said in a notice posted to its site on Wednesday about a board meeting that will take place next month.

RELATED ITEM Sarch: Transparency for bonuses? Bring it on!

Recruiting incentives have long been a concern for regulators.

Earlier this year, Finra began reviewing conflicts of interest at 14 of the largest brokerage firms, reportedly focusing on broker compensation and recruiting arrangements.

In August 2009, after the brokerage industry ramped up recruiting bonuses to target disaffected wirehouse representatives, Securities and Exchange Commission Chairman Mary Schapiro sent a letter to securities firm chief executives that warned them to carefully supervise brokers for churning or unsuitable sales, given the financial incentives for brokers to meet production and asset targets found in recruitment packages.

Former SEC chairman Arthur Levitt, who ran the agency from 1993 to 2001, called for the disclosure of recruitment packages.

Responding to Mr. Levitt, Finra in 1999 proposed a rule that would have required disclosure of accelerated payout arrangements for brokers who change firms. Finra, then known as the NASD, never acted on the proposal.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

Events

What to do when your partnership ends

Breaking up is hard to do: and that is certainly true when it comes to advisory firms. Financial Adviser Rob Holdford tells his story and explains how you can survive and thrive when a partnership dissolves.

Video Spotlight

The Search for Income

Sponsored by PGIM Investments

Recommended Video

Path to growth

Latest news & opinion

T. Rowe Price steps up its game to serve financial advisers

The Baltimore-based mutual fund giant is more aggressively targeting financial advisers with a beefed-up wholesale crew and placement on custodial platforms.

The most important tax changes for 2018

The Internal Revenue Service issued inflation adjustments to more than 50 tax provisions for 2018.

Shift to Roth 401(k)s 'highly likely' part of tax reform: former Treasury official Mark Iwry

Mandated contributions to Roth accounts would likely only be partial, as opposed to having a full repeal of pre-tax accounts.

E*Trade acquiring custodian Trust Company of America

Discount broker buying second-tier custodian for $275 million.

Another thousand Dow points higher, and investors yawn

Market milestones keep falling like dominoes, with 51 records broken so far this year.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print