FINRA’s 2015 Regulatory and Examinations Priorities Letter provides guidance regarding areas of focus in the “Sales Practice” for this year. Previously, we discussed the various sales products that FINRA will be monitoring this year; and yesterday, Josh Horn discussed FINRA’s recently adopted Supervision Rules that affect the Sales Practice. This blog entry will discuss FINRA’s focus on firms’ controls regarding “Wealth Events”, particularly Individual Retirement Account (IRA) Rollovers.
FINRA is concerned with the long term impact of brokers’ recommendations when approached by an investor that is faced with a decision about what to do with a large amount of money arising from an inheritance, life insurance payout, sale of a business or other major asset, divorce settlement, or an IRA rollover, among other “Wealth Events”. FINRA plans to closely monitor firms’ controls for compliance, supervision, suitability, and disclosures regarding these “Wealth Events” in 2015.
As more than 25% of Americans are investing their retirement savings in IRAs, FINRA plans to specifically focus on firms’ controls in this area. In particular, FINRA appears concerned with firms’ marketing their own broker-dealer sponsored IRAs. FINRA will closely monitor communications and firm policies, focusing on practices regarding the disclosure of fees and costs related to the IRAs.
Firms and broker-dealers that provide investment advice regarding Wealth Events, particularly IRAs, should take extra steps to ensure they are FINRA compliant this year. FINRA has explicitly targeted this area for additional oversight in 2015. Thus, firms should conform their policies, procedures, controls, disclosures, and training to meet FINRA’s expectations.