FINRA Broker-Compensation Rule Approved by SEC

Meyer WilsonA 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.


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