FINRA Treading Carefully on Complex Product Regs: CEO Cook

After issuing a request for information on complex products that drew widespread criticism from the investment industry, the Financial Industry Regulatory Authority will consider the comments carefully before making any changes to regulation, the group’s CEO says.

“Our minds are not made up about this,” FINRA CEO Robert Cook told ThinkAdvisor on Monday at the regulator’s annual conference in Washington.

FINRA took comments until May 9 on which products should be classified as “complex.”

“It’s an important topic,” Cook said. “We’ve received a lot of comments and we’re going to go through them very carefully and think about whether any further action is appropriate — and what that would look like.”

RIA founder turned crypto evangelist Ric Edelman told FINRA in his comment letter that FINRA’s ideas are “fatally flawed” and “completely unworkable.”

As set out in Regulatory Notice 22-08, FINRA could limit retail investor access to many mutual funds, ETFs and closed-end funds, according to Dave Nadig, financial futurist at ETF Trends.

If FINRA moves ahead with a proposal, Cook said that it would include an economic analysis and that the broker-dealer regulator would put that plan through a formal comment period. All FINRA rules must be approved by the Securities and Exchange Commission.

“This is stepping back early on in the process and soliciting input on the space in general and we look forward to reading the comment letters to see how [broker-dealers] currently market these products and whether any adjustments may be needed,” Cook said.

“There’s an important balance to be struck between preserving investor choice and creating space for product innovation and at the same time we have adequate protections for investors.”

Pictured: FINRA CEO Robert Cook.

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