Broker-dealer sales representatives need to better understand complex products they sell. Instead of just giving disclosures to customers, a rep should also discuss product risks with them, said Rick Ketchum, the Chief Executive of the Financial Industry Regulatory Authority (FINRA). Clarifying the risks of complex products and avoiding conflicts of interest were major themes of an address by Ketchum to the Securities Industry Financial Markets Association (SIFMA) Compliance and Legal Society in New York. Highlights of his comments are outlined below.
Complex products
Firms would find future SEC and FINRA sales exams easier if they have written down why recommended products are suitable for a specific investor. This is done now where a broker has an advisory relationship with a customer. Although such a requirement is not a FINRA rule, future SEC rulemaking on common fiduciary principles for broker-dealers and investment advisers may affect such requirements.
A record may need
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