FINRA Rule to Provide Aid for Transferring of Assets

The Financial Industry Regulation Authority proposed a new rule last week that will provide questions that should be asked to the self-regulatory organization.

NASDAQ reports that when member firms hire another firm’s representative, they must provide an electronic or paper “educational communication” from FINRA to former clients if they try to persuade them to move their assets.

This written communication must be provided to clients when they are first contacted about transferring their assets.

Regarding the ruling, FINRA officials said, “The former customer’s confidence in and prior experience with the representative may be one of the customer’s most important considerations in determining whether to transfer assets to the recruiting firm.”

The FINRA manages tests that applicants take in hopes of becoming registered stock brokers. Passing the Series 7 test with a score higher than 70% and passing the Series 63 with a score of 72% or better will result in registration.

Bringing new members into the brokerage industry can be good for everyone, but they must be brought up to speed with these new rules.

“More education — it’s hard to say that’s a bad thing,” Danny Larch, president of Leitner Sarch Consultants and industry recruiter, said.

However, there are still concerns, these clients may not be aware of important factors while making a decision about whether or not to transfer assets.

“Regulators may be looking in the wrong places,” Larch said. New advisors or advisors who change firms have been fully vetted by their employers are likely to be transparent with clients. These new rules will encourage transparency and honesty within the industry.

FINRA is the largest independent regulator for all U.S. securities firms. Business Wire, stated that the FINRA now aids in virtually every aspect of the securities business from educating and registering to writing and enforcing rules and laws.

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