Finra Focuses On Educational Communication With Investors In New Compensation Proposal

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Brokerdealer.com blog update profiles a new proposal from Finra that has educating investors as their main focus. This proposal is a revised version of the one Finra filed last spring with the SEC. In the previous filing, brokers would have required brokers to disclose to investors recruiting incentives above $100,000 they received for switching to a new firm. This new proposal requires firms to send “educational communication” to investors when a broker moves to that firm. This educational communication proposal is drawing a lot of backlash as critics believe it watered down the original idea for compensation disclosures. This brokerdealer.com blog update is courtesy of InvestmentNews’ Mark Schoeff Jr.  and his article, “Finra releases revised broker compensation proposal“.

Finra released a revised proposal Wednesday for a rule designed to help investors understand the financial incentives their brokers had for switching to a new firm.

Under the rule, brokerages would have to send an “educational communication” to investors working with a broker who is moving to their firm. The document customers receive would outline questions they should ask their broker about the compensation and other inducements the broker is getting to transfer to the new firm.

The questions would help investors determine whether the broker’s financial incentives create a conflict of interest and whether investors would incur costs by following the broker to a new firm.

The broker-compensation proposal is a revised version of one the Financial Industry Regulatory Authority Inc. filed with the Securities and Exchange Commission in March 2014 but later withdrew amid industry resistance.

To continue reading about this investor educational communication focused Finra proposal, click here.

What’s Best For The Customer Doesn’t Matter According To Finra CEO Ketchum

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Brokerdealer.com blog update profiles Finra CEO, Richard Ketchum has come back at the Department of Labor (DOL), as it proposed to raise invesment advice standards for broker dealers. Ketchum claims this could cause firms to discontinue sales of individual retirement accounts as it would force there be a bias against products with higher fees, regardless of what’s best for the customer. This brokerdealer.com blog update profiling the implications of this new DOL proposal is courtesy of InvestmentNews article, “Finra’s Ketchum criticizes DOL fiduciary rule“, with an excerpt below.

Finra’s CEO Richard Ketchum criticized a Department of Labor proposal to raise investment advice standards for brokers Wednesday, saying it might cause firms to curtail — or even discontinue — sales of individual retirement accounts.

Mr. Ketchum said the DOL proposal would create a bias against financial products with higher fees, even if they’re the best recommendation for a client, and that it could force firms to move to a fee-based rather than brokerage business model. He also said it’s not a good idea to regulate retirement products, such as 401(k)s and IRAs, differently than other investments.

The Securities and Exchange Commission should take the lead in drafting a fiduciary-duty rule “across all securities products,” Mr. Ketchum told reporters on the sidelines of the Financial Industry Regulatory Authority Inc’s annual conference in Washington. SEC Chairwoman Mary Jo White favors such a rule, but has acknowledged it’s not clear whether she has the support of the five-member panel to make a proposal.

To continue reading about Finra CEO Ketchum and his take on the DOL proposal and his opinion on the SEC acting on this issue first, click here.

 

Finra CEO Pumps The Breaks On Massive Data-Collection Proposal

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Brokerdealer.com blog profiles Finra CEO’s, Rich Ketchum, decision to stop working on the proposal for a massive data-collection system with concerns over secruity issues. Ketchum is expected to report to Congress tomorrow, Friday, May 1, 2015, to explain why. Since the proposal’s start it has received much resistance by others in the industry due to fear of putting the clients and risk and seems Finra is now starting to agree. This brokerdealer.com blog update is courtesy of InvestmentNews’ Mark Schoeff Jr.  and his article, “Finra CEO Rick Ketchum backs off data collection plan“, with an excerpt below.

Finra is putting the brakes on its proposal for a massive data-collection system over concerns about the security of customer information, the organization’s chief executive is expected to tell Congress on Friday.

The Financial Industry Regulatory Authority Inc. has received strong industry resistance to its so-called Comprehensive Automated Risk Data System over its potential costs and the possibility that it will expose customer data to hackers. The comment period for the proposal ended on Dec. 1 last year.

In prepared testimony, Finra chief executive Rick Ketchum said that although CARDS will not collect client names, addresses and Social Security numbers, Finra shares concerns about “bad actors” being able to obtain information that “could possibly be reengineered to identify individuals.”

The regulator is studying the potential data-security threats, Mr. Ketchum will tell the House Financial Services Committee, and is evaluating whether CARDS data can be collected through “existing data sources.”

To continue reading about what Ketchum is expected to tell Congress tomorrow, click here.