Broker-dealers should be aware that the Financial Industry Regulatory Authority (Finra) has also made it clear that even if firms decide to opt out of offering rollover advice by going the education-only route, the regulators expects firms to have policies and documentation requirements in place and carefully supervise the delivery and content of such education.
The second-biggest risk to broker-dealers who opt to provide education only to rollover prospects is “rogue employees,” Reish said.
If a registered rep delivers educational materials, but tells prospects “here’s what I would do,” it will be a compliance red flag, Reish said. “The key here is lots and lots of training on a consistent basis.” Firms need to specifically tell reps, “Here’s what you can say, here’s what you can’t say.”
Clear documentation of the content, processes and procedures used to educate reps and employees will help firms defend themselves if a rogue rep triggers regulatory scrutiny, Reish said.
“From a firm’s perspective, you need to be able to say, ‘we do a lot of education, but this employee violated our process. But it’s just him, it’s not systemic,’” Reish said.