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Regulation and Compliance > Federal Regulation > FINRA

FINRA Warns Investors About Fake Financial Designations

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The Financial Industry Regulatory Authority warned investors to carefully review the alphabet soup of professional designations, as some can be fake.

FINRA’s professional designations tool lists a whopping 177 financial designations.

The self-regulator notes in a just-released investor alert that there’s a difference between being registered or licensed and holding a professional designation. 

Those providing financial advice and conducting sales activities in the securities and insurance industries must be registered with a regulatory body — as brokers must register with FINRA, a state securities regulator or both, while advisors must register with either the Securities and Exchange Commission or a state securities regulator.

However, professional designations, FINRA states, “are generally administered by an issuing organization that determines the criteria needed to earn the designation.”

FINRA warns that while some financial designations involve “fairly rigorous standards” to earn and maintain the designation, allow investors to verify the status of anyone claiming to hold that designation and a few even have a formal disciplinary process, others are relatively easy to earn and might be maintained by simply paying a yearly fee.

Investors should also be wary of financial professionals who tout their designation as the reason they should be hired. “A professional designation should never be the sole reason you select an investment professional,” FINRA says.

Financial credentials can also be used fraudulently.

“Fraudsters often try to build credibility and gain trust by claiming to be an expert or have a special designation — a tactic known as source credibility,” FINRA says. However, many organizations that issue financial designations “provide the public with a database of those who hold an up-to-date designation.”

Investors should probe anyone who claims to hold a designation about “when they earned it and whether it’s still current — and then, if possible, verify with the issuing organization that this is truly the case,” FINRA says.

— Check out Treasury Regulatory Report Zeros In on Accredited Investor Definition, SROs on ThinkAdvisor.


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