FINRA Chairman Issues Warning To Bd’s About Complex Products And Excessive Fees

The Financial Industry Regulatory Authority (FINRA) has issued a statement to broker-dealers to keep a close eye on complex structured products and excessive fees for routine services, as reported in Investment News. Richard Ketchum, the Chairman and Chief Executive of FINRA, notes that there were more than 8,000 different retail structured products sold last year and the availability of those complex products poses added challenges to a firm’s compliance department, as reported from FINRA’s annual meeting in Washington, DC.

A basic problem with the complex structured products is that brokers must have a solid understanding of them in order to be able to do a proper suitability analysis and recommendation to retail investors. This requires firms to enhance their product training programs for both new and old brokers and many firms have assessed this need. Some firms have established committees to pick which investment products they will sell and those they won’t. Some firms are making customers interested in complex products sign an option account approval form and others prequalify the customers and make them sign specialized investor qualification agreements.

The FINRA boss said that they were going to be looking at excess fees some firms were charging, such as postage and handling charges for a typical trade serving to automatically inflate the commission.

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