Richard Ketchum: The 2013 IA 25 Extended Profile

Industry officials believe FINRA’s fight to become advisors’ SRO has merely been put on the backburner for now.

But advisors and broker-dealers can count on FINRA moving ahead with other initiatives this year, particularly conflict issues, Ketchum said, such as broker compensation. He noted in mid-April that FINRA is now reviewing the comments it received on its controversial proposal under Regulatory Notice 13-02 to require that brokers’ recruitment compensation be disclosed when they switch firms, and “will soon decide on how to proceed.”

Other concerns for FINRA include “complex products from a suitability, sales practice and disclosure standpoint.” Ketchum said during his mid-April speech at the SEC’s National Compliance Outreach Program for Broker-Dealers that “heightened supervision” is still necessary when it comes to complex products.

He noted that broker-dealers can expect the regulator to provide by early summer a best practices guide regarding conflicts of interest, and also told BDs that the next step in FINRA’s “continuing efforts to integrate and merge surveillance with exams” is to increase the amount of data that FINRA gets from its member firms. Said Ketchum: “We are looking to download significant transactional information” from member firms.

FINRA is also closely monitoring the sales of closed-end funds and private REITs, Ketchum said, “which may be attractive because they offer high interest payments [that] investors may not understand often exceed cash flow and is paid partly out of principle.”

Other high priority areas include monitoring closely the sales and marketing of private placements, Ketchum said. “We also remain concerned with fixed-income products as investors move to concentrated positions of longer-duration or high-yield fixed income products in an attempt to capture higher interest rates.”