Despite being relatively quiet on the issue
since September last year, the Financial Industry Regulatory Authority Inc. hasn't forgotten about a plan to require brokers to make additional disclosures to clients regarding recruitment incentives received when moving from firm to firm.
Susan Axelrod, executive vice president of regulatory operations, said on Wednesday that Finra is still doing research for a proposed rule, commonly referred to as the "bonus disclosure rule," and remains “inspired to move it forward in the short term.”
“We're still doing some work on this and there's more to come,” she said, speaking on a panel at a conference in Chicago for the Securities Industry and Financial Markets Association. .
“This is an important issue because it provides transparency to clients about fees. There was a lot of industry feedback on this.”
The comments echoed statements by Finra chief executive Richard Ketchum at another SIFMA event last month. He indicated that the regulator planned to move forward on a rule.
Finra's board of directors authorized the regulator to move forward with a new rule in September. The plan, according to a summary posted to Finra's website at the time, explained that the next version of the rule would be a toned-down version of the original proposal.
Brokers would be required to provide an “educational communication” to clients to suggest questions they should ask their brokers to make an “informed decision” before following them to a new firm.
Originally, brokers would have had to provide a handout specifying a range for how much they were paid to move to a new firm if the incentives were over $100,000, but that rule was
pulled in June amid industry criticism.
At this point, Finra is still in the research phase and exploring some level of “general disclosure,” Ms. Axelrod said.
“Some of the things we're looking at are disclosure and what that could look like — a general disclosure to customers whose [financial adviser] has moved firms and who they are soliciting,” she said. “We're doing some education and research as to how that disclosure could look.”
A new rule would have to go out for public comment once again through Finra's website before being submitted to the Securities and Exchange Commission for approval.
