A Financial Industry Regulatory Authority rule encouraging investors to
ask what incentives their brokers received to change firms has been approved
by the Securities and Exchange Commission. As per the rule, brokers would
be required to send their clients an “educational communication”
if they are trying to persuade the client to make the move with them.
The document is provided by FINRA and will discuss if the broker had received
financial incentives creating a conflict of interest, as well as whether
or not some of the assets can be transferred with the broker.
The educational communication will also provide investors with a list of
questions they are encouraged to ask the broker.
The rule went through a long journey before finally being sent to the SEC
in December for review. The initial proposal of the rule would have made
it so brokers would let their clients know about compensation packages,
but was later altered to the “educational communication.”
The SEC order states the following,
While educating former customers about important considerations to make
an informed decision whether to transfer assets to the recruiting firm,
FINRA believes the proposed rule eliminates or reduces the privacy and
operational concerns regarding the previous proposal (e.g., by removing
the requirement to disclose to former customers the magnitude of recruitment
compensation paid to a transferring representative).
When the rule will be implemented is currently unknown, but the approval
from the SEC should help to speed up the process.
Contact Meyer Wilson today if you have you need to discuss a potential
investment fraud claim. Our securities fraud attorneys offer
free consultations so you can better understand your rights.