B-Ds need to up their conflicts of interest prevention game, Finra says

Regulator's report identifies dozens of areas for potential pitfalls
OCT 15, 2013
Broker-dealers need to do more to prevent conflicts of interest, Wall Street’s industry-funded watchdog says in a new report. The Financial Industry Regulatory Authority Inc. identified dozens of potential conflicts that were outlined by broker-dealers the regulator surveyed, ranging from managers who spend more time on revenue-generating activities than supervision, compliance staff subjected to pressure from sales management to protect high-producing advisers and registered representatives recommending fee-raising transactions without regard to their suitability for clients. “While many firms have made progress in improving the way they manage conflicts, our review reveals that firms should do more,” Finra chairman and chief executive Richard G. Ketchum said in a news release. “To help firms analyze the conflicts they face and implement a conflicts management framework appropriate to the size and scope of their business, we are publishing examples of how some large broker-dealer firms address conflicts.” In the report, Finra called compensation a “major” source of conflicts of interest. “The rewards firms offer associated persons may influence their behavior in ways that affect customer interests,” the organization said, adding that it focused on four specific areas it said could “create, exacerbate or mitigate compensation-related conflicts of interest.” The areas included compensation for brokers, surveillance and supervision of registered representatives as they approach compensation thresholds, compensation for supervisory personnel, and deterrents to poor conflicts management. The report recommends that firms include independent voices when new products are pitched, maintaining the independence of their wealth management businesses and creating disclosures that allow clients to see what factors affect the performance of financial products they are sold. Finra started its review of firms’ conflict management practices in July 2012.

Latest News

'Bogged down' advisors just want to have fun (again)
'Bogged down' advisors just want to have fun (again)

Jim Cahn, of Wealth Enhancement Group, lifts the lid on his firm's partnership model, his views on RIA M&A, and the widely slept-on reason why advisors are merging into larger organizations.

Vestwell unveils new emergency savings account offering
Vestwell unveils new emergency savings account offering

The fintech firm is cementing its status in the workplace savings space with its latest ESA offering, which employers can integrate into their existing benefits package.

'Money Mimosas' and other ways to show your Valentine financial love
'Money Mimosas' and other ways to show your Valentine financial love

Wealth managers offer unique ideas for couples to grow closer emotionally and financially.

Limra research finds financial confidence on the rise among Black American workers
Limra research finds financial confidence on the rise among Black American workers

Survey findings suggest increased sense of financial security and more optimistic 2025 outlook, while highlighting employers' role in ensuring retirement readiness.

DOGE efforts sideswipe muni bonds backed by federal lease payments
DOGE efforts sideswipe muni bonds backed by federal lease payments

Falling prices for some securities within the $4 trillion state and local government debt market spotlight how the push to shrink spending is sending shockwaves across the US.

SPONSORED Record growth: Interval funds emerge as key players in alternative investments

Blue Vault Alts Summit highlights the role of liquidity-focused funds in reshaping advisor strategies

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.