The financial disclosure requirement is definitely a step in the right direction. See Mark Schoeff’s article Finra backs Incentive comp disclosure rule. But, how does FINRA know what the advisor said to the investor or provided to the investor? There is only one way. The financial disclosure statement has to be written and the investor has to sign a document that says he has reviewed the disclosure and he understands it. This document is required for all investors who follow the advisor to the new firm. And, the new firm’s compliance department is responsible for managing the process. FINRA auditors will add this process to their agenda.
If FINRA does not enact this type of process we will know this is one more half-hearted attempt at doing what is best for investors. Even though, Rick Ketchum, FINRA CEO said: “This proposal reflects our commitment to transparency and investor protection“, the truth is investors are not protected if there are no provisions for enforcement.
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