The first time Finra chair Eric Noll opened an options account, the 60-page disclosure was TLDR — too long, didn’t read.
“It went right into the trash can,” Noll, CEO of Context Capital Partners, said Thursday at the Financial Industry Regulatory Authority Inc.’s annual conference in Washington. “Never read it. Never paid attention to it. We haven’t evolved too much away from that.”
The need for brokerages to do a better job of explaining complicated products like options was one of the industry challenges Noll highlighted in a discussion with Finra CEO Robert W. Cook.
“We do it in a way where they’re virtually unreadable,” said Noll, who heads the 21-member board of governors of Finra, the broker-dealer self-regulator.
Finra launched an exam sweep on options trading a couple of years ago and has joined the Securities and Exchange Commission in increasing its scrutiny of financial advisors’ recommendations of complex products.
The increased regulatory efforts come amid calls by the industry and many lawmakers to open private markets more widely to retail investors. Proponents argue that doing so gives Main Street investors more opportunity to diversify their portfolios and take advantage of the growth of start-up companies.
But state and federal regulators have warned that private placements also are consistently the source of investor harm.
“We have to really think about what that means to disclose risks and be transparent about what we do,” Noll said. “The more democratized our markets become, the more important that’s going to be.”
Another emerging challenge for brokers is social media communications, Noll said. He noted that although the investment sector hasn’t been roiled as badly as regional banks by rumors that were started on Twitter and other platforms, brokerages must be prepared to respond to misinformation.
“I don’t think we as an industry have figured out how to do that,” Noll said.
Noll emphasized that brokerage industry must make more progress on diversity. He cited Finra observations that African Americans are more likely to invest in cryptocurrency than in public equities despite the collapse of the FTX crypto trading platform and other digital asset dangers. He attributed the trend to the fact that underrepresented investors don’t see themselves reflected in the traditional markets.
“They feel like they’re safer in the crypto space,” Noll said. “It’s completely opposite of what it should be. We need to … make sure everyone is getting the benefit of our regulation and the benefit of safer markets.”
Nine-month electronic trading freeze and share lending program at the center of dismissed claim.
Meanwhile, Rossby Financial's leadership buildout rolls on with a new COO appointment as Balefire Wealth welcomes a distinguished retirement specialist to its national network.
With a smaller group of companies driving stock market performance, advisors must work more intentionally to manage concentration risks within client portfolios.
Professional athletes are often targets of scam artists and are particularly vulnerable to fraud.
The brokerage giant tells Wall Street it will use artificial intelligence to reach clients it has never been able to serve — and turn the technology's perceived threat into a competitive edge.
As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management
Growth may get the headlines, but in my experience, longevity is earned through structure, culture, and discipline
