SIFMA today submitted a comment letter to the Financial Industry Regulatory Authority (FINRA) in response to their proposed rule requiring disclosure of enhanced compensation related to recruitment of registered representatives.
“A tenet of a uniform fiduciary standard of care for both registered representatives and registered investment advisors is necessary and adequate disclosure,” said Ira Hammerman, senior managing director and general counsel of SIFMA. “Investors should know up front about any potential conflicts of interest, and those disclosures should be in clear, plain English.”
In its letter, SIFMA stated its belief that enhanced compensation paid to a registered representative as a recruitment incentive, when a conflict of interest, should be the centerpiece of the Proposed Rule. SIFMA believes that, at key moments in the investment process, investors need clear, targeted and understandable disclosure on key factors to make properly informed investment decisions. SIFMA stated that simple, plain-English disclosures permit investors to make informed choices.
SIFMA also addressed a specific question raised in FINRA’s proposal regarding when a representative must disclose his or her receipt of enhanced recruitment compensation—while a registered representative is still at their old firm or when at their new firm. SIFMA stated that imposing a disclosure requirement at the old firm is unworkable from an operational and supervisory standpoint. The new firm would have no effective mechanism to supervise compliance with the disclosure requirement because the registered representative is not yet associated with the new firm.
Lastly, SIFMA noted that investors and the industry would benefit if FINRA worked with the industry to create a model approach that clearly articulates appropriate disclosure for enhanced compensation under the proposed rule.
The full comment letter can be found at the following link:https://www.sifma.org/issues/item.aspx?id=8589942258