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FINRA Considering Brokerage Disclosure Statements

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  • Baker, John
    The Financial Industry Regulatory Authority has requested comment on a concept proposal to require member firms, at or prior to commencing a business
    Message 1 of 1 , Oct 27, 2010
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      The Financial Industry Regulatory Authority has requested comment on a concept proposal to require member firms, at or prior to commencing a business relationship with a retail customer, to provide a written statement to the customer describing the types of accounts and services it provides, as well as conflicts associated with such services and any limitations on the duties the firm otherwise owes to retail customers. Regulatory Notice 10-54 (Oct. 2010). The proposal is intended in part to anticipate broker-dealer disclosure requirements that may be imposed under the Dodd-Frank Act. The FINRA staff contemplates a document similar in purpose to the Form ADV Part 2 brochure, which registered investment advisers must provide to each advisory customer. Firms would continue to provide the more particularized sales practice disclosures currently required in interactions between registered representatives and customers.

      The Regulatory Notice gives some detail on the kinds of disclosure that would be required, which are proposed to include the types of brokerage accounts and services the firm provides; disclosures designed to permit customers to evaluate the firm's services, products, and fees; disclosures as to financial or other incentives that a firm or its registered representatives have to recommend certain products or services; disclosures of conflicts that may arise; and limitations on the duties a firm owes to its customers. In the case of investment company securities, the statement would include information on sales charges or service fees. Such issues as the delivery method, timing, and the form and content of the statement, however, have still to be fleshed out. The proposal obviously is at a very early stage, and the comments to FINRA are likely to be quite influential in shaping any rule that may emerge. The comment period expires December 27, 2010.

      Regulatory Notice 10-54 is available online at

      http://www.finra.org/Industry/Regulation/Notices/2010/P122362



      John M. Baker <JMB@...>
      Stradley Ronon Stevens & Young, LLP http://www.stradley.com
      1250 Connecticut Avenue, NW, Suite 500
      Washington, DC 20036
      202.419.8413
      202.822.0140 fax
      FundLaw Listowner http://groups.yahoo.com/group/fundlaw
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