It is the end of the year, and many people are thinking about the status of their retirement accounts and planning any changes to their investments. FINRA also has retirement accounts on the brain. It is thinking about the ways member firms recommend investments in retirement accounts, and planning what to do about that.
FINRA recently issued Regulatory Notice 13-45, giving notice that one of its examination priorities in 2014 will be reviewing firm practices when recommending a rollover of assets from an employer-sponsored retirement plan to an IRA.
The Securities Recommendation
According to FINRA, when a participant in an employer-sponsored 401(k) retirement plan changes employers, he or she has four options:
- leave the money where it is;
- roll the assets to the new employer’s plan (if possible);
- roll the assets over to an IRA (by far the largest source of contributions to IRAs); or
- cash out the account, which could have tax penalties and unfavorable tax treatment if the employee is under 59½ years old.
When making this decision, many investors seek the advice of a financial advisor, who may be a registered representative of a broker-dealer. If a broker-dealer recommends that an investor roll over retirement plan assets to an IRA, or otherwise engages in marketing IRAs, it typically makes securities recommendations. These activities are subject to FINRA rules.
To learn more, read our full client alert.