Clinic Comments on FINRA Proposal Concerning Communication to Investors Related to Account Transfers

Investor Advocacy Clinic graduate research assistant Alexandra Hughes recently filed a comment on SR-FINRA-2015-057, a proposal to adopt FINRA Rule 2273, Educational Communication Related to Recruitment Practices and Account Transfers.

The Clinic’s comment, available in full here, supported the proposed rule change to the extent it aims to protect investors who may be moving a financial account after their representative changes firms. The Clinic suggested several changes to increase the proposal’s efficacy.  First, we advised that the rule include disclosure of representative compensation plans or the provision of information concerning compensation on the investor’s request.  Second, we believe that the rule should apply to all customers who decide to transfer assets, whether they are current, new or former clients.  Third, we believe that moving brokers should provide information about the risks of transfers for a longer period of time and before the investor receives account transfer documentation.  Finally, the Clinic noted that the rule should require that firms ensure that the educational communication is delivered to the customer.

The Investor Advocacy Clinic represents the voice of small consumer investors.  In addition to providing legal representation of small investors who have claims against their brokers, the Investor Advocacy Clinic evaluates and comments on proposed rules that impact the small investor and engages in educational outreach for investors and professionals who work with investors.