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FINRA Releases Further Information Regarding Its Proposed Broker Compensation Disclosure Rule

During the December 6, 2012 FINRA Board of Directors meeting, the Board authorized FINRA to seek comment on a proposed rule that would require brokers switching firms to inform customers they are soliciting from their old firm of the recruiting bonus they receive from their new firm. In Regulatory Notice 13-02, FINRA requested comment from the industry by March 5, 2013 on its proposed rule.

Under the proposed rule, a recruiting member firm must disclose the details of “enhanced compensation” in connection with its recruitment of a broker from another financial services firm, if the broker will earn in excess of $50,000 for one year following their registration date. The member is required to disclose this information to former retail customers of the broker, prior to the customers opening accounts with the recruiting member firm. The text of the proposed rule can be found here https://www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/industry/p197601.pdf.

Lax & Neville represents a substantial number of brokers switching firms and assists in the review of these very recruiting packages. We intend to submit a comment letter to FINRA. If any brokers have any questions regarding recruiting packages that they have been offered and would like to provide us with their ideas for the comment letter, please contact us at (212) 696-1999.