Securities Litigation

FINRA this week released its targeted exam letter requesting information on firms' conflict-of-interest policies surrounding broker compensation and retail accounts. The sweep follows up on FINRA's Conflicts Report from October 2013, which recommended changes to firm supervision and oversight of conflicts of interest. The letter requests extensive categories of information covering retail accounts during the period from August 2014 through July 2015. FINRA seeks information about firm policies and procedures to:

• Identify and manage conflicts;
• Surveillance of conflicts issues; and
• Balance brokers' short-term compensation and customer long-term interests.

Together with descriptions of:

• Any changes to policies or practices in the past year;
• Recruiting and retention packages;
• Manager and Supervisor compensation packages;
• Compensation structures by product for 55 different product categories; and,
• Top 10 products, both proprietary and independent.

Responses are due September 18, 2015. Last March, FINRA proposed Rule 2243, which would have required public disclosure to customers of recruiting bonuses (among others). FINRA quickly dropped the proposal amid heavy criticism. SR-FINRA-2014-010 (withdrawn June 20, 2014). The exam letter is here. FINRA's 2013 Report is here. Thomas K. Potter, III (tpotter@burr.com) is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Tom is licensed in Tennessee, Texas and Louisiana. He has over 29 years' experience representing financial institutions in litigation, regulatory and compliance matters. See attorney profile. © 2015 by Thomas K. Potter, III (all rights reserved).