Compete or comply? When it comes to the tried and true marketing strategy of meal-included seminars, FAs are feeling the heat of an intensifying spotlight on this practice. Firms resolved to maintain their place on the cutting edge know well that in order to keep ahead of the regulatory climate in America, their compliance division must always worry about what they will regulate next. And how do you simply and honestly compete for business without getting fined or sued?
In the same way that the “do not call” list forever changed cold calling, if you offer seminars or host client group gatherings of any kind, this intensified regulatory focus on the seminar is going to change the way you do business. Client or potential client gatherings remain one of the most civilized ways for consumers who need financial advice to connect with those qualified to give financial advice, and yet FAs and firms will need to decide how to defend this practice.
Without a doubt, the Financial Industry Regulatory Authority is and will continue to be the SRO that impacts the way the public perceives seminars. FINRA is the largest non-governmental regulator for all securities firms doing business in the United States. It was created in July 2007 through the consolidation of NASD and the member regulation functions of the New York Stock Exchange. With over 3,000 employees and offices in Washington, DC, New York and in 15 district offices around the country, their tag line reads: “Every day FINRA protects investors by working to keep the capital markets fair.”
From April 2006 through June 2007 the NASAA (the umbrella arm of state regulatory agencies), FINRA and the SEC collaboratively conducted 110 examinations of what they refer to as “free lunch” seminars. The stated purpose of these inspections was to review sales seminars targeted toward seniors and retirees for compliance with securities laws and regulations. The joint report, published in September 2007 and prepared by FINRA, concluded that: “Financial services firms should take steps to supervise sales seminars more closely, and specifically take steps to review and approve all advertisements and sales materials for accuracy.”
Indeed, FINRA’s Herb Perone confirms that these fact-finding studies or sweeps of seminar practices are now an ongoing and continuing aspect of FINRA’s program to protect elderly investors.
The next move by FINRA, in November 2007, was to announce plans to launch a comprehensive “integrated, multimedia advertising campaign aimed at baby boomers.” The first of its planned ad campaigns will include television, radio and print media. Ads are running in frequent rotation over a seven-week period on CNBC, Discovery and History channels, with print ads running in Fortune, Forbes, Kiplinger’s, Smart Money, BusinessWeek, and US News & World Report. Both these and FINRA’s online advertisements are intended to drive their target demographic to their website www.finra.org.
FINRA’S website is discreet, comforting; nothing flashy. There, investors will find simple, user-friendly investor tools and educational resources. If you have not already visited their website, certainly take the time to do so. You should know exactly how their broker check and complaint procedure links are structured as well as what type of information and perspective your clients will find on the site about you, your firm or your meal-included seminar. You should duplicate this effort with your state regulator and understand the political climate of securities regulation in your locale: Is your state regulator fulfilling its mandate to enforce securities rules and regulations or is it aggressive, prosecutorial and overreaching?
Stanton Selbst, of SmartPros Financial Services Training in Hawthorne, N.Y., is concerned that FINRA is disconnected from the business it is regulating. He observes: “There are over 670,000 advisors registered with the SEC and of that number 99.9 percent are honest. They work hard for their customers, and they are not perfect, because none of us are. They don’t have crystal balls about the future of the marketplace, and so many of them say they stay awake at night worrying about what happens to their clients. This is really a case of a few infecting the mass. To indict the industry because of [the misdeeds of] a few is guilt by association, and I thought Senator McCarthy was gone.”
No BalanceIndeed, when you consider that FINRA’s sting-like investigation included only 110 seminars and you take a minute with your calculator and imagine how many meal-included gatherings or seminars might have been hosted by the nation’s 5,100 firms and 670,000 FAs during that same period, from April ’06 to June ’07, it may seem disproportionate to launch an expensive and comprehensive PR campaign targeting the seminar practice as a whole.