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FINRA Proposes Broker Disclosure Changes

Clients can be affected financially if they move with their broker to a new firm.

| BY Kent McDill

The Securities and Exchange Commission is considering a rule that would require brokers to provide full disclosure to clients about how much they are paid to transfer from one firm to another.

The rule would clear up issues related to conflict of interest involved in a broker enticing clients to move with him or her from one firm or another. Such moves can cost clients in transfer fees and tax consequences.

The Financial Regulatory Authority (FINRA) filed the proposal with the SEC March 10. The SEC must make the proposal available for public comment and review before it makes a ruling.

“The former customers often may not be aware of the potential financial impacts to their assets that may results if they decide to transfer assets to a new firm, including, among other things, costs incurred to close an account with their current firm, transfer assets or open an account the recruiting firm, and tax consequences if some assets are not portable and must be liquidated before transfer.” FINRA said in its filing with the SEC.

The rule would apply to brokers who are paid more than $100,000 in incentive compensation to provide written notice within one year to clients who are asked to move with the broker from one firm to another. The $100,000 includes upfront or backend bonuses, loans, and financial transition assistance.

An earlier draft of the proposal was met with significant backlash, citing concern over a broker’s privacy and the manner in which brokers would make such disclosures to customers. Commonwealth Financial Network, Ameriprise Financial and the Financial Services Institute Inc., objected to the proposal.

The proposal is expected to affect how companies handle recruitment and disclosure to customers. Also, employees who are in charge of recruiting and receive compensation for a successful transfer could be affected.


About the Author

Kent McDill


Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.

In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.

McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.

McDill is the father of four children, and an active fan of soccer, Jimmy  Buffett and all things Disney.