The Financial Industry Regulatory Authority plans to consider at its Dec. 6 Board meeting several rule proposals and amendments, chief among them a proposal that would require broker-dealers to disclose to customers brokers’ compensation packages.
Securities lawyer Patrick Burns spoke out publicly in an October interview with AdvisorOne saying that he wants to change the status quo in broker compensation. “Our clients who are investment advisors would like to see the playing field leveled in terms of disclosures,” Burns told AdvisorOne at the time.
Burns, based in Beverly Hills, Calif., told AdvisorOne in that interview that unlike brokers, his RIA clients must disclose all forms of direct and indirect compensation and conflicts of interest, including soft dollars and any additional benefits that an advisor gets for using a certain custodial platform.
“I think this proposal has some legs,” Burns (right) told AdvisorOne in a separate interview on Thursday. “There has been a lot of talk about FINRA harmonizing BD and RIA regulations, moving to a common fiduciary standard for RRs and IARs, etc.” The timing of the rule proposal, he added, is “very interesting.”
The rule FINRA will consider in December would require “disclosure to transferring customers of recruitment compensation packages offered to induce registered representatives to move from one firm to another.”
Burns said a lot of his comments from the October AdvisorOne article on Broker Bonuses “ring true” for this current FINRA proposal. “Clients should receive full and fair disclosure about all direct and indirect costs of doing business with a brokerage firm, as well as conflicts (incentives to hit production targets, sell proprietary products, etc. needed to have their bonuses forgiven).”