FINRA’s board announced Friday that it would seek comment on its controversial plan to require brokers to disclose their compensation packages to clients.
The board said that it would seek comments via a Regulatory Notice. Specifically, the comment period will ask for feedback on a proposed rule that “would require a member firm that provides, or has agreed to provide, to a registered person enhanced compensation in connection with the transfer of employment (or association) of the registered person from another financial services firm (previous firm), to disclose the details of the enhanced compensation to any former customer of the registered person at the previous firm who is contacted about moving or moves their account to the new firm.”
The proposed rule would require such disclosure for one year following the date the registered person associates with the new firm. However, it would not apply to enhanced compensation of less than $50,000 or to customers that meet the definition of an institutional account pursuant to FINRA Rule 4512(c), except any natural person or a natural person advised by a registered investment advisor.
FINRA announced Nov. 29 that its board would be mulling such a rule at its Dec. 6 meeting.
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.