Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Regulation and Compliance > Federal Regulation > FINRA

Are Changes Coming to FINRA Exams?

Your article was successfully shared with the contacts you provided.

The Financial Industry Regulatory Authority is moving ahead with its controversial plan to collect broker-dealer account data through its Comprehensive Automated Risk Data System (CARDS) program as FINRA is “getting to problems where investors are severely harmed too late,” and is “testing” the impact of its broker recruitment compensation plan, Richard Ketchum, the self-regulator’s CEO, said Monday.

Speaking at the Securities Industry and Financial Markets Association’s annual conference in New York during a question-and-answer session with Ira Hammerman, SIFMA’s executive vice president and general counsel, Ketchum also said FINRA will send out sometime this week an “anonymous” questionnaire from a third party to broker-dealers in order to get their feedback on FINRA’s exam program.

“We are interested in what burden we are imposing and whether we are focused on the right things or not,” Ketchum said.

Comments on FINRA’s second iteration of its CARDS proposal are due by Dec 1.

Ken Bentsen, SIFMA’s president and CEO, said Monday at the SIFMA event that SIFMA opposes CARDS. Hammerman added during his Q&A session with Ketchum that SIFMA “will have a comprehensive solution” for FINRA regarding CARDS by Dec. 1.

Rep. Scott Garrett, R-N.J., chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, told FINRA in mid-October to hold off on its “costly and burdensome” CARDS plan.

“After a preliminary reading of the proposed rule, I remain far from convinced that this new, costly and burdensome proposal is needed,” Garrett said in his October statement.

Ketchum also said that FINRA hopes to seek amendments to the two rules — communications with the public and its gifts, gratuities and noncash compensation rules — the self-regulator was reviewing as part of its retrospective review.

FINRA plans to take the comments on how those rules should be revised to its board in December, Ketchum said. FINRA’s board would have to approve any amendments made to both rules.

Ketchum said that FINRA is also “testing” the impact of a broker recruitment compensation plan.

FINRA issued for public comment on Sept. 22 a proposal that curtails its earlier draft rule requiring, in most cases, disclosure of recruitment bonuses and incentives.

The proposal would require recruiting firms to provide a FINRA-created educational communication to former retail customers of a transferring representative who are considering transferring assets to the rep’s new firm.

“Our thought would be a consistent disclosure document for all firms,” Ketchum said Monday at the SIFMA event.

“We don’t want to do anything that discourages competition,” he said, “but we want to ensure that customers can ask and think through the right questions” regarding the costs they may incur, investments that may not be transferrable, as well as the financial incentives the broker is receiving when shifting to another firm.

— Related on ThinkAdvisor:


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.