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Regulation and Compliance > Federal Regulation > FINRA

FINRA -- A new rule every three days

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Since the advent of NASD 05-50, several agents have asked me if they should become FINRA-registered representatives. If your goal is to work as a registered rep and broaden the number of financial arrows in your quiver, then my answer is yes. But if your goal is to sell only fixed annuities, then perhaps you should steer clear.

Looking back over the last dozen years, you find that FINRA (originally NASD) issued or reinterpreted a rule affecting the business of reps and broker/dealers every third business day. In the securities world, scrutiny and liability are far more evident than in the insurance world. Forget any thoughts of “innocent until proven guilty.” In my own practice, I routinely received NASD notices citing a rule that one of my reps allegedly broke. Since then, FINRA rules have continued to proliferate to the point that it is very difficult to maintain a clean record.

If your main business is selling fixed insurance products, you need to disclose what you do, when you do it, and to whom you do it. Make sure you answer every U-4 question correctly because you have agreed “that I am subject to administrative, civil or criminal penalties if I give false or misleading answers” and FINRA is the body that defines what is misleading.

FINRA has an ongoing habit of continually trying to expand their jurisdiction beyond what Congress intended. A decade ago, they more or less succeeded in defining certificates of deposit as securities, unless they were offered directly by bank employees. In a recent speech, FINRA CEO Mary Shapiro strongly implied that life insurance settlements and reverse mortgages should be subject to FINRA jurisdiction. With the quixotic nature of FINRA regulation, is it any wonder a broker/dealer wants to see and approve any fixed product or seminar script an agent might use? It is never certain that FINRA may not someday sanction the broker/dealer tomorrow for not supervising what is a non-securities activity today. Being securities registered means FINRA arbitrates everything you do to make a living.

If your goal is to sell variable annuities, mutual fund and other securities, then obtaining securities registration makes sense. However, if your motivation for becoming a Series 6 rep is simply to sell fixed annuities, then the liability may well exceed the asset.

Jack Marrion is president of Advantage Compendium Ltd. in St. Louis, Mo. Responses and questions can be sent to [email protected].


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