FINRA, in Regulatory Notice 10-54, seeks comments on a concept proposal that would require broker-dealers to provide retail customers with a written disclosure document very similar to a Form ADV used by registered investment advisers. Comments are being taken until December 27, 2010.
As set forth in the notice, the FINRA staff is considering a rule-making process calling for such a document to be provided to retail customers at or prior to the formation of a business relationship. The document might include disclosures such as:
* Types of accounts provided by the firm, and the fees associated with those accounts (including information on whether the fees are fixed or negotiable).
* Disclosure of the types of services provided by the firm.
* Disclosure of incentives given to reps. to recommend or sale one product over a similar one, including disclosures of all compensation received by the firm for sales of a particular product or offering, and disclosure of referral compensation, etc.
* Disclosure of any limitations on duties, such as disclaimers of any continuing duties to monitor accounts for ongoing suitability, no responsibility for unsolicited orders, etc.
I believe that we can likely expect some type of rule-making in this area by FINRA, the SEC, or both, especially in light of the study requirements of Dodd-Frank. Firms might wish to consider the ramifications of such documents and submit comments in an effort to have input into any rule proposals that are released.
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