Investor Advocacy Clinic Comments on FINRA Proposed Rule Change 2015-009

By: Jason Robinson, Summer 2015 Graduate Research Assistant

On April 23, 2015 the Financial Industry Regulatory Authority (FINRA) filed a proposed rule change with the Securities and Exchange Commission (SEC). FINRA proposed SR-FINRA-2015-009 which calls for the adoption of FINRA Rule 2272. The new rule “would govern sales or offers of sales of securities on the premises of any military installation to members of the U.S. Armed Forces or their dependents.” Specifically, Rule 2272 calls for these securities salespersons to conspicuously disclose in writing the identity of the member offering the securities and that the securities offered are not being provided on behalf of the federal government. The proposed rule would also incorporate FINRA’s suitability obligations.

The Investor Advocacy Clinic recently filed a comment on this rule proposal, expressing support for the proposed rule. Studies have shown that members of the U.S. Armed Forces are more vulnerable to broker misconduct than the population at large. Rule 2272’s enhanced disclosures would lead to greater transparency which would allow military personnel to make more informed investment decisions.

The Investor Advocacy Clinic offered two additions to proposed Rule 2272:

  • FINRA’s creation of a standardized Rule 2272 disclosure form
  • Expansion of Rule 2272 to sales off military installations

A FINRA standardized form would serve the rules purpose of making sure military customers are better informed and the Clinic sees no significant drawbacks to expanding the rule to on and off military installations. Click here to read the Clinic’s comment letter in its entirety along with other comment letters on the proposal.