The Financial Industry Regulatory Authority plans to issue changes and provide further guidance regarding its rules on communications with the public as well as gifts, gratuities and non-cash compensation after a retrospective review found those rules need updating.
FINRA announced in April that it was seeking feedback on the two rules as part of its “retrospective review” initiative. The comment period on the two rules expired May 8. On Tuesday, FINRA released the retrospective reports on the two rules, which included comments on where they need to be improved.
FINRA has said that its retrospective rule review process will be ongoing.
The self-regulator stated that while the reports “reflect widespread agreement among affected parties that the rule sets have been largely effective in meeting their intended investor protection objectives,” the rules and FINRA’s administration of them “may benefit from some updating and recalibration to better align the investor protection benefits and the economic impacts.”
What Your Peers Are Reading
Robert Colby, FINRA’s chief legal officer, said in releasing the reports that over the next several months, FINRA will explore “a combination of guidance, proposed rule modifications and administrative measures to enhance the effectiveness and efficiency of the rules.”
Suggested enhancements to FINRA’s communications with the public rule included potential “harmonization” of the regulatory standards for brokers and advisors when communicating or providing investment advice about securities to investors, particularly in the areas of projections, performance and testimonials. Firms also noted the “widespread confusion and disagreement” as to which rules apply with respect to dual registrants when they are communicating with customers, and urged FINRA to provide more guidance.