Regulatory Monitor: Broker-Dealer Update
On March 23, 2016, the Financial Industry Regulatory Authority (FINRA) adopted a new rule requiring the distribution of educational materials related to recruitment practices and account transfers in certain situations. FINRA had sought to impose a rule related to broker compensation disclosure in 2014 but withdrew its original proposal when it received strong industry opposition. The new revised rule—FINRA Rule 2273—eliminated the original controversial requirement to disclose certain broker incentive compensation paid in connection with a transfer to a new firm and for firms to provide certain information to FINRA regarding broker compensation; however, the industry has still expressed concerns about the new rule. In order to address some of the uncertainty surrounding the rule, which is effective November 11, 2016, FINRA issued guidance regarding the new rule in August 2016.