FINRA Rule 2273: Recruitment Practices

FINRA has long been concerned with practices used by broker-dealers and their newly registered representatives to convince clients to transfer accounts from the representative’s old firm as well as the fees that are sometimes associated with such transfers.  To address these concerns, FINRA proposed Rule 2273 which is intended to establish a requirement for broker-dealers to deliver an educational disclosure to potential clients in connection with recruitment practices and account transfers.  The SEC has approved FINRA Rule 2273 and it will be effective on November 11, 2016.

Representatives who begin working for a new broker-dealer often contact former customers hoping to continue their business relationship by transferring their assets to their new broker-dealer, thereby maintaining continuity by staying with the representative.  In this situation, customers often feel very comfortable with the representative and would prefer that he/she continue Read More…