The Financial Industry Regulatory Authority has filed its broker recruitment-bonus rule with the SEC.
The rule, filed December 16, would require delivery of a Finra-produced “educational communication” to clients that encourages them to ask about financial incentives their broker received for moving to a new broker-dealer, the costs of transferring accounts, and the differences in products and services between the firms.
The communication would have to be delivered within three days of when a client was first contacted about moving his or her account.
Finra made several tweaks from an earlier version of the rule it floated in May.
First, the delivery-requirement period was shortened to three months following a broker’s start date at a new firm, down from six months.
The shorter coverage period was done “in recognition of the typical time frame for communicating with former customers and to lessen any associated operational and supervisory burdens,” Finra said in its filing.
Second, Finra is now proposing to exempt firms from the delivery requirement when accounts are moved in bulk due to mergers and acquisitions. Also exempted are cases where a broker’s move results only in the change of the broker-dealer of record and not a transfer of assets.
Last year, Finra scrapped its original broker-bonus plan first proposed in 2013. That plan would have required detailed dollar disclosures of recruitment incentives. Finra then revamped the rule and asked for comments in May, resulting in the latest version filed with the SEC.
Assuming SEC approval, Finra will announce an effective date within two months after getting the go-ahead.