FINRA to Mull Broker Compensation Disclosure Rule

Jonathan Henschen, president of Henschen & Associates, a broker-dealer recruiting firm, told AdvisorOne on Thursday that while the FINRA proposed rule would be a "non-event" for the independent broker-dealer channel "wirehouses will be affected in a big way with reps concerned that disclosure to clients about their large bonus to move, make them look as if they are moving for their own interests rather than the clients." Added Henschen: "When you consider the minute differences that exist between the wirehouses, it's hard to argue with client's potential conclusion."

Other items on FINRA's list includes a proposal to seek "essential information" from crowdfunding portals that want to apply for membership with FINRA under the Jumpstart Our Business Startups (JOBS) Act. FINRA notes that prospective funding portals would file their information with FINRA "voluntarily" until the SEC and FINRA put in place rules governing funding portals, which will likely come next year.

The North American Securities Administrators Association listed crowdfunding as one of its top 10 investor threats in August. Matt Kitzi, Missouri Securities Commissioner and chairman of NASAA's Enforcement Section, said at the time that "the number of entities pitching themselves as crowdfunding vehicles online has risen dramatically–from a couple hundred to about 1,700." However, he notes, "none of the domain name holders can do anything until rules are written" regarding crowdfunding. That's what the Securities and Exchange Commission is grappling with now.

FINRA said it will also consider in December amendments to its own proposal to permit persons who are the "subject of" allegations of sales practice violations made in customer-initiated arbitration claims, but who are not named as parties to the arbitration, to seek expungement relief by several means.

The revised proposal incorporates changes suggested in comments to Regulatory Notice 12-18 as well as views of a FINRA committee.

In addition, FINRA's Board will consider proposed amendments to FINRA Rule 5210 (Publication of Transactions and Quotations) to address a firm's obligation to have policies and procedures in place that are reasonably designed to review the firm's trading activity for, and prevent, certain wash sale transactions (i.e., transactions in a security that involve no change in the beneficial ownership of the security).