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November 18, 2011 at 03:31 AM
The Financial Industry Regulatory Authority is warning broker-dealers to ensure that their supervisory procedures regarding use of certifications and designations in advising senior investors are in order, as protecting vulnerable customers, including senior investors, continues to be a high regulatory priority for FINRA.
FINRA issued in November a Notice to Members that urged BDs to implement, as appropriate, the practices outlined in the Notice to strengthen their own supervisory procedures.
FINRA points to Regulatory Notice 07-43, which requires firms, at a minimum, to have supervisory procedures in place reasonably designed to prevent their registered persons from using a senior designation in a manner that is unethical or misleading. “Firms that allow the use of any title or designation that conveys an expertise in senior investments or retirement planning where such expertise does not exist may violate FINRA Rule 2010, NASD Rule 2210, NYSE Rule 472, and possibly the anti-fraud provisions of the federal securities laws and FINRA rules,” the Notice warns.
NASD Rule 2210 and NYSE 472 prohibit firms and registered persons from making false, exaggerated, unwarranted or misleading statements or claims in communications with the public, the Notice states. This prohibition includes referencing nonexistent or self-conferred degrees or designations or referencing legitimate degrees or designations in a misleading manner. Firms, the Notice warns, must “therefore must have adequate supervisory procedures in place to ensure that their registered persons do not violate this requirement.”
As with all supervisory procedures, these procedures should be written, clearly communicated to employees, effectively enforced, and they should cover how approved designations may be used, the Notice states. In addition, FINRA reminds firms that all advertisements and sales literature as defined in NASD Rule 2210(a), including communications that include the use of these designations, must be approved prior to use and in writing by a registered principal pursuant to NASD Rule 2210(b)(1).
