The brokerage industry is warning that lack of a cost-benefit analysis could doom Finra’s plan to require disclosure of broker-recruitment bonuses.

In comment letters to the SEC, industry interests say Finra needs to do more to justify the controversial disclosure plan.

“The lack of analysis is inconsistent with Finra’s commitment to economic impact assessment and evidence-based rulemaking,” wrote Cetera Financial Group general counsel Nina McKenna.

“Implementation of the [recruitment] proposal would be greatly enhanced by further [cost] analysis,” wrote Securities Industry and Financial Markets Association (Sifma) general counsel Ira Hammerman.

In its filing, Finra claimed that the proposal would not impose undue costs on firms, but “Sifma is unaware of the basis and analysis supporting this conclusion,” Hammerman said.

“We encourage Finra to utilize [its promised] economic impact assessment framework and to … provide supporting evidence where practicable,” wrote Financial Services Institute general counsel David Bellaire. “Furthermore, Finra should engage in a retrospective review of the finalized rule” after five years.

Commonwealth Financial Network complained that Finra cited no enforcement actions “or other empirical evidence that transition assistance [to brokers] creates a conflict of interest. … We urge the commission to reject the proposed rule in its current form and direct Finra to redraft the proposal.”

The comments could provide the basis for a future legal challenge. Business groups have effectively challenged new industry rules based on a lack of a cost-benefit analysis, causing a delay in much of the Dodd-Frank implementation, for example.

The Finra proposal would require disclosure to customers of recruitment incentives totaling $100,000 or more when their broker changes firms and makes contact with them.

Separately, firms would have to inform Finra of any broker recruit who is expected to increase earnings by the greater of 25 percent or $100,000 during the first year at the new firm.

Additionally, customers would have to be told of potential costs in transferring accounts and issues with product portability.

Comments on the proposal were due April 18.

Several wirehouses expressed their support for the Finra plan, while independent firms generally opposed it.

One issue a number of commenters are concerned about is the lack of any disclosure requirement on the part of a former firm.

In its SEC filing, Finra decided not to require former firms to disclose retention bonuses or incentives to retain clients of a departed broker.

Wells Fargo Advisors “respectfully disagrees,” wrote Robert McCarthy, the firm’s director of regulatory policy. “The presence of retention incentives could motivate a representative at the former firm to suggest that transfer costs will be incurred [or] suggest issues of portability” when those issues may not apply.

“The old firm should be required to disclose any enhanced compensation,” wrote the Public Investors Arbitration Bar Association (Piaba), which represents investor plaintiffs’ attorneys.

“Finra’s proposed rule focuses too narrowly on enhanced compensation for registered representatives switching firms,” Piaba said.

The Financial Services Roundtable said Finra should consider making former firms disclose information about transfer fees and portability, rather than the recruiting firm.

Commenters also urged the SEC to drop a requirement for oral disclosure, which is in addition to a written document, and they want harmonization of the separate information that would be disclosed to customers and Finra.