Board of Governors Authorizes FINRA To File Recruitment Compensation Proposal With SEC

Thursday, October 10, 2013 09:50
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Board of Governors Authorizes FINRA To File Recruitment Compensation Proposal With SEC

Tags: breakaway brokers | compensation | FINRA | registered reps

The Financial Industry Regulatory Authority (FINRA) today announced that its Board of Governors approved a proposal requiring brokers to disclose recruitment compensation paid to them as an incentive to move to a new firm. The proposal needs to be submitted to the Securities and Exchange Commission (SEC) for review and approval. If approved, brokers would need to disclose their recruitment compensation to any customers that choose to follow them to their new firm for a full year.

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The proposal contains two components, according to a FINRA press release: a disclosure obligation and reporting to FINRA. The disclosure requirement would apply to recruitment compensation – including signing bonuses, up-front or back-end bonuses, loans, accelerated payouts, and transition assistance – of $100,000 or more, and to future payments (trade-based or asset-based) contingent on performance criteria. Firms would be required to disclose to their customers the compensation paid to the transferring representative in ranges. The first range would be $100,000 to $500,000; the next would be $500,000 to $1 million; followed by increasingly larger bands.

 

 

 

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