Under whose rule

[URDRWHO]

For some reason I can't load the link? Maybe it is my latest virus software or something.

I think FINRA is a shell for the Proctologist association. They just need to know....don't ask why.

Change is always hard. I know when I was making the decision to leave the securities market it was the ego that fought me the most and not the business decision.

There were many reason to leave the market but the egocentric rules was high on the list. Story........

I ran into one of my clients at a party. It was just a hello, how are you, see you type of meet. About two weeks later I get a letter from the guy. It said, "he appreciates the job I am doing for him, how well the XYZ stock and mutual funds are doing and BTW that woman on his arm at the part...please keep that a secret", he said it wasn't his wife. He said he had a bit too much to drink, was there alone at the party and well, you can guess the remainder of the story.

So you know the rules the BD always needs a copy of incoming and outgoing correspondence that mentions securities.

I'm sitting there with a letter that could ruin my clients life if it was read by the wrong people but the NASD says I must send that letter out to some stranger. If I don't I can be fined or sanctioned, if I do and word leaks out could my client file a civil action against me? Defence is always the cost.

The story was pre-HIPPA. How does all that sharing work now under all the privacy laws.

Anyhow the above story was by no means the determining factor to leave the business but it was a consideration.

These days I run my shop without dealing with any third party admin. entities like the BD arrangment. It is so much less of a PITA.

I always wondered about that correspondence rule. Did the NASD really think that if someone who was up to no good, that someone would really send incriminating letters to their BD?

Back in the 80's I remember reading about a Reg Rep that was found to have commingled insurance and securities files in the same cabinet drawer. The reg rep incurred a $5,000 fine. I wonder if he appealed the case.

Yep, big surprise. A registered rep doesn't do what he's supposed to do and he gets nabbed for it. This actually hurts your argument, not helps it. Obviously FINRA does care about people following the rules.

The story is a blog entry, so if you don't know the rules about outside business, it sounds like he got dumped on. On the other hand, my broker dealer sends me a reminder MONTHLY to report exactly this type of thing, for exactly this reason (along with reminding me to update addresses, don't file bankruptcy, wash my car, change my underwear, etc).

It's not for everyone. There are moments I wonder why they have those cameras in the mens room.....

Dan

 

[xrac]

If FINRA is in charge and only RR sell FIA is anybody better off? Please read:

BrokeAndBroker.com at RRBDLAW.com by Bill Singer, 917-520-2836 ::

 

[JMO Fan]

If FINRA is in charge and only RR sell FIA is anybody better off?

Yes, those for whom FIAs are unsuitable, but would've bought if not for the additional disclosure.

 

[xrac]

Yes, those for whom FIAs are unsuitable, but would've bought if not for the additional disclosure.

In the incident sited we have misconduct by both the RR and the FINRA. We read of RR misconduct on a fairly regular basis. If the RR pulls out 15 pages of disclosure and say sign here and here and here do you actually think very many people will read or understand that stuff? Maybe a few. I have been an RR and once people trust you they will sign almost anything. All it becomes is like the mortgage closing where you sign papers for 30 minutes that no one reads and then the papers are stuck in the file.

 

[JMO Fan]

In the incident sited we have misconduct by both the RR and the FINRA. We read of RR misconduct on a fairly regular basis. If the RR pulls out 15 pages of disclosure and say sign here and here and here do you actually think very many people will read or understand that stuff? Maybe a few. I have been an RR and once people trust you they will sign almost anything. All it becomes is like the mortgage closing where you sign papers for 30 minutes that no one reads and then the papers are stuck in the file.

Even then, if the client claims a lack of comprehension, the RR has documented disclosure as defense.

 

[patch36]

So the RR is better off, not the client?

 

[DAX]

I've been in the Insurance Business since 1974 and a Reg Principal for almost 30 years and have a different spin on this:
NASD (now FINRA) evolved out of the financial fiasco that caused the Great Depression. Prior to the NASD there was no regulation of the Financial Services Industry; a sales person could tell a customer anything, promise the blue sky, and there were no consequenses. The NASD and it's oversight was a result of negotiations between the US Congress and the Financial Services Industry that kept the government out of the Business.
FINRA has long taken the position that any product sold by a Registered Rep is subject to their supervision and oversight; hence the reqirement for disclosure of outside business activities. We may not agree with FINRA's position, but it leaves no grey area.
Broker Dealers are concerned that they may be held responsible for the outside business activities of their Registered Reps. Most BDs will allow an OBA as long as they can distance themselves from the activity; ie: if I am a RR with ING and selling Christmas Trees, it's unlikely that the general public will be confused as to whether ING is in the tree business. On the other hand, if I am selling insurance or annuities, the public may well believe that ING is involved.
The problem with the case outlined on the blog is that the Reg Rep's BD failed to supervise him properly. I am sure the BD got wacked along with the Agent.
I can tell you all kinds of stories about Reg Reps who paid fines to FINRA for violations of this type.
Is it fair? Probably not, but it's the price we pay for being in the industry and selling investment products.

 

[djs]

In the incident sited we have misconduct by both the RR and the FINRA. We read of RR misconduct on a fairly regular basis.

Correct. It's a bit like the police. We can argue that crime statistics would be lower if we did away with the local police department, but we would be fooling ourselves.

The fact that you read about RR misconduct shows that someone is looking out for the client in the end. Again, this is similar to how I can read that several people had some misconduct in my local town. Does not reading this make the problem go away? No.

I'm not a big fan of FINRA, but I see what happens when people have no rule enforcement.

Dan

 

[JMO Fan]

Better, Consistent Disclosure

So the RR is better off, not the client?

That's really up to the client. They'll have the disclosure. So they're responsible for the consequences.