Finra asks brokers to declare bonuses which it is paying to clients in proposal- MS, BAC, and UBS

Financial Industry Regulatory Authority (Finra) passed a proposal for comments yesterday that would require brokers and financial advisers to disclose recruiting bonus and other incentive entitlements to their new clients after switching job. The proposed addition to the regulations is aimed to protect consumers of financial services against potential conflicts of interest impairing fairness in dealings with clients.

The comment period for on proposed rules typically last up to two months after that time U.S. SEC’s approval will be sought.

The suitability and appropriateness of any financial plan varies from case to case basis and unrealistic sales target coupled with lucrative recruitment bonuses can push a financial adviser to recommend and sell financial plans that are not suitable to a specific client. Earlier this year in July Finra had announced that conflicts in the compensation plans and recruiting incentives of many of 14 largest brokerage houses in the U.S. were under review. The names of the firms under review were undisclosed.

According to David Sobel, Chairman of National Association of Independent Brokers and dealers ‘says the amendment would not be of much use because investors would not stop going to a specific broker merely on the basis of the cut he earns from his employer. “If a broker is doing a good job for a client, the client’s going to go with them.” he said. Sobel also hinted that if passed the proposal could have a bad impact on the smaller brokerages. According to him advisers in small firms would be prompted to demand bonus commensurate to what rivals offer and small scale employers “That’s going to be bad for small firms that can’t compete with that kind of bonus money,”

Recruitment bonuses to the financial advisers are mostly structured as forgivable loans which vests only after a broker has served a specific number of years and that seems completely unconnected with the amount of revenue an adviser brings in. The upfront, one time bonuses are only awarded by the larger firms because small firms cannot afford to pay such amounts in one go.

Marc Dobin, founding member of Florida based trade group of brokers Dobin Law Group, also shared Sobel’s concerns. Saying “Where does the line get drawn?” Dorbin anticipated that the though the new rule is initially limited to recruitment bonuses’ disclosure there is a strong probability it  would later extend to take other components of the brokers compensation plans within it’s ambit. Also highlighting many other components of an advisers’ typical compensation package like performance based promotions and reimbursable expenses, he said “maybe everything gets disclosed.” If the regulator continues it’ss ventures into this direction.

Christine Jockle spokeswoman for Morgan Stanley (NYSE:MS), which employs the largest headcount withheld response saying “We would anticipate commenting during the comment period,” Susan McCabe, Merrill Lynch owner Bank of America Corporation (NYSE:BAC) and Karina Byrne, UBS AG (USA) (NYSE:UBS) spokeswoman also declined commenting. Managing director at New York-based human resource consultancy Gilbert Tweed International Richard Lipstein, said advisers at brokerage firms are “honorable people,” and very few of them would chose to use “their clients as cannon fodder” by recommending bad investment decision only to win incentives.

The shares of UBS AG (USA) (NYSE:UBS) were up 0.75% to $16.19. shares of  Morgan Stanley (NYSE:MS) were up 1.37% to $16.97. The shares of Bank of America Corporation (NYSE:BAC) were up 1.72% to $10.64.

For consideration of being featured on WallstreetPR, contact:

Please make sure to read and completely understand our disclaimer at FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. Any content posted on our website is for educational and informational purposes only and should NOT be construed as a securities-related offer or solicitation, or be relied upon as personalized investment advice. WallStreetPR strongly recommends you consult a licensed or registered professional before making any investment decision. Neither nor any of its owners or employees is registered as a securities broker-dealer, broker, investment advisor (IA), or IA representative with the U.S. Securities and Exchange Commission, any state securities regulatory authority, or any self-regulatory organization. WallStreetPR often gets compensated for advertisement services that are disclosed on our disclaimer located at

Published by Benjamin Roussey

Benjamin Roussey is from Sacramento, California. He has two master’s degrees and served four years in the U.S. Navy. His bachelor’s degree is from CSUS (1999) where he was on a baseball pitching scholarship. His second master’s degree is an MBA in Global Management from the University of Phoenix (2006). He has worked for small businesses, public agencies, and large corporations. He has lived in Korea and Saudi Arabia where he was an ESL instructor. Benjamin spends his time in between Northern California and Cabo San Lucas, Mexico, committing himself to his craft of freelance and website writing.