Finra Approves Proposed Rules Requiring Brokers to Disclose Signing Bonuses
By Matthias Rieker
The brokerage industry's self-regulator Thursday approved a proposal that would require brokers to tell their clients
about any big bonuses they receive when they change firms.
The major brokerages rely heavily on recruiting already successful brokers, but the bonuses that are paid have always
been a private matter.
The Financial Industry Regulatory Authority aims to change that with new rules that would affect mainly companies such
as Bank of America Corp.'s (BAC) Merrill Lynch, Wells Fargo & Co. (WFC) and Morgan Stanley (MS).
Finra's board adopted a set of rules that would require firms to disclose signing bonuses, including upfront or back-
end payments, loans, accelerated payouts, and transition assistance of $100,000 or more. Firms wouldn't have to disclose
the exact amounts of bonuses, only the ranges they fall in--for example, $500,000 to $1 million.
The rules would also require firms to report to Finra expected increases in total compensation of at least 25% or $
100,000 over the prior year, whichever is greater, paid to newly recruited brokers during the first year. Such reports
would trigger an examination "to look for sales abuses that may be motivated by the increased compensation and to inform
any future rulemaking related to compensation incentives," Finra said.
The Securities and Exchange Commission will now review the proposed rules.
"This proposal is about making sure the customer can make a fully informed decision to follow a broker to a new firm
and understand the costs associated with transferring his or her account," said Richard Ketchum, Finra's chairman and
chief executive, in a press release.
Write to Matthias Rieker at email@example.com
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