The Financial Industry Regulatory Authority’s second attempt at a recruitment-bonus disclosure rule hasn’t won many fans. 

Securities firms say the plan to require disclosure of brokers’ recruitment incentives is fraught with operational hurdles and could open brokers to litigation.

On the other side, state regulators and plaintiffs’ attorneys say the latest proposal doesn’t go far enough in disclosing conflicts brokers may have with hiring incentives.

Finra’s proposal is a slimmed-down version of a controversial earlier plan that was scrapped last summer. That original plan would have required detailed dollar disclosures of recruitment incentives.

The rehashed plan would simply require delivery of a Finra-written communication to clients that would encourage them to ask about the financial incentives their brokers received for making a move. The communication would have to be delivered within three days of when a client was first contacted about moving his or her account.

Finra asked for comment on its revamped proposal in May. Comments were due July 13.

In comment letters, financial services firms applauded Finra for scaling back the detailed disclosures from the first proposal, but they say the new plan will be too difficult to supervise.

For one thing, starting the clock on the three-day delivery requirement would be impossible, industry commenters say.

The Securities Industry and Financial Markets Association (SIFMA) and the Financial Services Institute, among other groups, suggested that the communication be delivered along with account-transfer documents.

But state regulators want delivery to be done “in advance of any attempt to contact the customer regarding the transfer of an account,” said a comment letter from the North American Securities Administrators Association. 

Additionally, state regulators as well as the Public Investors Arbitration Bar Association, which represent investor plaintiffs’ attorneys, want Finra to mandate disclosure of the dollar amounts of recruitment deals.

“NASAA is disappointed that its prior call for greater transparency into this dark corner of industry practice has not been incorporated into the current proposal,” NASAA wrote.

The Charles Schwab Corp. also called on Finra to resurrect the detailed disclosures in the prior plan. 

The current proposal “places the onus on the customer to pose questions to the transferring representative in the hope that the key information will be disclosed,” Schwab wrote.

The proposed disclosure requirement would apply for six months after a rep leaves a firm, but some industry commenters wanted that time frame reduced.

SIFMA also called for an exemption in cases where recruitment packages are worth less than $100,000 and, along with other commenters, wants an exemption for account transfers that occur as a result of a merger or acquisition.

Additionally, the big Wall Street trade group and several individual firms called on Finra to make clear that the delivery of the communication could not be used as evidence of a solicitation for purposes of litigation.

Finra may still amend the disclosure rule prior to filing it with the SEC for approval. A Finra spokeswoman did not know about the timing of a formal rule proposal.