Finra warned on bonus disclosure plan

FSI calls $50,000 threshold "arbitrary,' says proposal overlooks other compensation

Feb 3, 2013 @ 12:01 am

By Frederick P. Gabriel Jr.

The main trade group representing independent-contractor broker-dealers will soon go public with its concerns about a Financial Industry Regulatory Authority Inc. proposal to require brokers to disclose recruiting incentives.

Although the Financial Services Institute Inc. has yet to file an official comment letter on the proposal, the group has identified three main areas of concern, said David T. Bellaire, the organization's general counsel.

The rule, which was proposed Jan. 3, would require registered representatives to disclose details of their enhanced-compensation arrangements to any customers that they solicit for a period of one year after changing firms.

Enhanced compensation — which includes signing bonuses, upfront or back-end bonuses, loans, accelerated payouts, transition assistance and similar arrangements — in an amount less than $50,000 wouldn't have to be disclosed.

In the comment letter it plans to file, the FSI will argue that the $50,000 threshold is “arbitrary,” Mr. Bellaire said last Tuesday at the FSI's annual meeting.

The proposal also fails to adequately distinguish between bonus compensation and compensation that is more “transitional” in nature, such as automated customer account transfer fees, he said.

Finally, the Finra proposal also overlooks other forms of compensation that present similar conflicts, such as retention bonuses, Mr. Bellaire said.

The comment period for the proposed rule change, which is known as RN 13-02, ends March 5.

fgabriel@investmentnews.com Twitter: @FredPGabriel

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

INTV

Special Needs Special Planning

Financial adviser John Nadworny’s path to help his son James led to his business focus on special needs planning.

Video Spotlight

Are Your Clients Prepared For Market Downturns?

Sponsored by Prudential

Recommended Video

Path to growth

Latest news & opinion

HighTower faces pressure to let investors cash out

After an IPO planned for last year didn't happen, the company could opt to satisfy its backers with a sale.

Envestnet to buy FolioDynamix

The deal, which is expected to close in the first quarter of 2018, will bring the total assets Envestnet works with to almost $2 trillion.

Jerry Schlichter's fee lawsuits have left an indelible mark on the 401(k) industry

After a decade of litigation, fees are lower and retirement plans are more transparent. But have the lawsuits gone too far?

10 best financial adviser jokes

How many financial advisers does it take to screw in a lightbulb?

With margins crashing, broker-dealers look to merge: report

Increased regulation is straining profit margins among broker-dealers, sending many of them into the arms of their bigger brethren.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print