Burr & Forman's Tom Potter Featured in Law 360 on "FINRA Exam and Spot Conflicts in Broker Pay."
In an article published on August 24, 2015, Tom Potter was quoted discussing an examination letter that the Financial Industry Regulatory Authority (FINRA) has sent to several retail-oriented brokerage firms to find more information about how firms are managing and mitigating conflicts in broker-dealer pay practices. The letter is very detailed in its requests, requiring brokers to identify how its products are displayed, the orders in which they are displayed and who decided the order. "Another tricky request for firms is that they detail all types of payment received for more than 50 different products sold to retail clients," Potter said. "That's a pretty tall homework assignment. Back to school on conflicts."
The examination letter also delves into recruitment and compensation practices, which FINRA attempted to address last year with a controversial proposal demanding that brokers disclose when they receive a recruitment bonus of $100,000 or more to switch firms. While that proposal was ultimately cancelled, results from the examinations could impact a similar, but less-restrictive, proposal that provides clients with a list of questions to ask their broker before transferring their account to the broker's new firm. "That re-proposal, which recently saw an initial comment period close, feasibly could be made stronger depending on what FINRA sees in the current sweep," Potter said. "The more cynical among us would say that if they turn up disappointing results (in the sweep), then that gives them more ammo to go back to the well on their rule."
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