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GOP Lawmakers Probe FINRA Chief on Complex Products Plan

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Republican members of the House Financial Services Committee are balking at the Financial Industry Regulatory Authority’s request for comment on potential plans to rein in complex products.

The lawmakers told FINRA CEO Robert Cook in a letter that FINRA’s Regulatory Notice 22-08 soliciting public comment on questions and policy considerations regarding retail investors’ access to “complex products” and options “raises potential regulatory changes that, if implemented, would raise costs and limit retail investors’ access to financial products and investment strategies that are widely available to other investors.”

They lawmakers said they were concerned that FINRA was “effectively seeking to propose a backdoor accredited investor standard on certain regulated securities that it deems unsuitable for retail customers. While such a change may be acceptable to the wealthiest customers of many FINRA member firms, it would only impede the progress of financial inclusion made possible through increased retail investor participation in our markets.”

A number of these changes, the lawmakers wrote, “could prohibit retail investors from trading in certain products, including options on registered securities.”

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

Cook told ThinkAdvisor on May 16 at the regulator’s annual conference in Washington that “Our minds are not made up” about the complex products plan. “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.”

The lawmakers asked Cook to answer questions by Sept. 30, including what evidence FINRA has indicating that the current rules and regulations governing access to options and options trading are insufficient to protect retail investors, as well as the impact any FINRA proposals would have on retail investors’ access to options.


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