Finra warns on misleading pitches for 'free' IRAs

Regulator says disclosure of fees is lacking

Jul 18, 2013 @ 4:19 pm

By Dan Jamieson

The Financial Industry Regulatory Authority Inc. is warning its member firms against using misleading pitches for “free” individual retirement accounts.

In a regulatory notice posted on Finra's website, the regulator said it had “observed overly broad language in sales material … that implies there are no fees charged to investors who have [IRA] accounts with the firms.”

In fact, accounts may be subject to other types of fees for opening, maintaining or closing accounts, in addition to commissions and other product-level expenses, the notice said.

“Some firms have published communications that feature prominent claims regarding an account's fee structure with only a footnote to disclose information about other fees that may apply,” the notice said. “This type of presentation does not comply with Finra” rules.

Claims about fees “must be accompanied by clear disclosure of the types of fees that may be charged,” Finra said in the notice, adding that disclosures should be in “close proximity” to a marketing headlines.

Most discount brokers actively market IRAs with no annual fees and no minimum investments. Full-service advisers also routinely waive IRA fees for their better customers.


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