Finra launches extensive sweep of broker-dealer cross-selling

Regulator looking into incentives firms are offering employees to promote bank products of an affiliate or parent company to retail brokerage customers in wake of Wells Fargo scandal.

In the wake of the Wells Fargo scandal, the Financial Industry Regulatory Authority Inc. is conducting a sweep of broker-dealer firms to see what kind of cross-selling programs they have been offering.
Finra is requesting an extensive list of data from broker-dealers about the incentives they offer employees to promote bank products of an affiliate or parent company to broker-dealer retail customers through referrals or direct sales. The self-regulatory agency also is looking for incentives to sell additional features, such as credit cards, securities-based loans or checking accounts.
“In light of recent issues related to cross-selling, Finra is focused on the nature and scope of broker-dealers’ cross-selling activities and whether they are adequately supervising these activities by their registered employees to protect investors,” Nancy Condon, Finra’s vice president of media relations and web services, wrote in an email.
The regulator wants data from Jan. 1, 2011, through Sept. 30, 2016, from broker-dealers, with a Nov. 30 deadline. Among the 15 categories of information demanded are:
• A description (with supporting documents) of metrics used to track and evaluate employees’ performance related to cross-selling programs, and the application of those metrics to performance ratings, promotion and termination decisions.
• A list of employees terminated or disciplined for not meeting production goals or for engaging in improper activities related to cross-selling programs.
• A list of investor complaints, litigation, arbitrations, or internal disciplinary or other actions related to cross-selling program.
The FINRA sweep comes as the Wells Fargo cross-selling scandal continues to reverberate across the financial landscape.
Authorities fined the bank $185 million on Sept. 8 for a program that led employees to open nearly 2 million new deposit and credit-card accounts without customers authorizing them. The bank also is the subject of a class-action shareholder lawsuit stemming from the scandal.