- 2,455
Maybe part of the problem is in that market people know you (other agents/competition) so you have to be extra careful because they know you no longer have certain licenses.
Investment Advice
- Thread starter Norwayguy
- Start date
- 4,132
Norway guy,
If you are not a member of Finra, how can they fine you?
IF you provide sound advice to a client that a client wants, how can they fine you?
If you are right how can they really do anything?
Back in the ole days when ever asked advice our honchos from the investment arm of the ole big mutual always used the term "if it were me.." when starting a sentence.
In other words "you can do what ever you want mr./ms. client, but if it were me.... "
I think you may be over worrying the reach of these guys as well as.. doesn't the client have to be pissed off?
If you are not a member of Finra, how can they fine you?
IF you provide sound advice to a client that a client wants, how can they fine you?
If you are right how can they really do anything?
Back in the ole days when ever asked advice our honchos from the investment arm of the ole big mutual always used the term "if it were me.." when starting a sentence.
In other words "you can do what ever you want mr./ms. client, but if it were me.... "
I think you may be over worrying the reach of these guys as well as.. doesn't the client have to be pissed off?
- 11,468
I have a different perspective. Let's see if it makes common sense even if it may not be "compliance friendly".
"Advice" is a professional service in exchange for compensation.
No compensation, no specific liquidation recommendations = a conversation.
I would have NO PROBLEMS having conversations with anyone about what they've got and how it works. That's a conversation.
However, giving any ideas about re-balancing a portfolio MUST be done in a generalized way. For example, you view the portfolio and see that there are way too much growth-stock mutual funds for the client. I would only suggest that they look into what's available in a bond fund. They should then call the 800# or their broker and get their opinion and find out what's available.
If you have a conversation about a specific security or mutual fund, that can be a problem. If you suggest they move $x out of ABC fund and move it into XYZ fund... you can have a problem.
Now, once a client understands what they have, you can show them what you have. If the client likes it... you simply ask how they would like to fund it. If the client wants to liquidate their securities, that was the client's decision, not your recommendation.
Ask the client why they would want to do that... and document it.
Have the client sign a "switch" letter to document the reasons why they are liquidating their securities and moving them to your product. Outline all surrender charges (if any) on the old product and how the new product would work.
The hard part is indicating that the move of funds is UNSOLICITED. You did not tell them to liquidate their securities. That was THEIR idea... and you have them sign the switch letter indicating that liquidating securities was UNSOLICITED.
So, if it were me, I'd have conversations about anything. I'd be very hesitant to recommend any trading ideas or to specifically recommend liquidating securities to fund an insurance product.
Even so, I wouldn't have any problem saying "I'm no longer licensed in that area. However, I would suggest that you take a look at what you've got and see what else is available."
Also, keep in mind that there are laws (I believe) where you cannot make any recommendations the holdings within a 401(k) plan without holding yourself out as an RIA/IAR. Which means that you must charge a fee for your advice to 'activate' that licensing and fiduciary duty on behalf of the plan participant.
Regulators are trying to scare every insurance agent & registered rep from having conversations... and I'm here to say that you can talk about anything... as long as the client clearly understands what their options are and who to go to to make the changes that THEY want.
"Advice" is a professional service in exchange for compensation.
No compensation, no specific liquidation recommendations = a conversation.
I would have NO PROBLEMS having conversations with anyone about what they've got and how it works. That's a conversation.
However, giving any ideas about re-balancing a portfolio MUST be done in a generalized way. For example, you view the portfolio and see that there are way too much growth-stock mutual funds for the client. I would only suggest that they look into what's available in a bond fund. They should then call the 800# or their broker and get their opinion and find out what's available.
If you have a conversation about a specific security or mutual fund, that can be a problem. If you suggest they move $x out of ABC fund and move it into XYZ fund... you can have a problem.
Now, once a client understands what they have, you can show them what you have. If the client likes it... you simply ask how they would like to fund it. If the client wants to liquidate their securities, that was the client's decision, not your recommendation.
Ask the client why they would want to do that... and document it.
Have the client sign a "switch" letter to document the reasons why they are liquidating their securities and moving them to your product. Outline all surrender charges (if any) on the old product and how the new product would work.
The hard part is indicating that the move of funds is UNSOLICITED. You did not tell them to liquidate their securities. That was THEIR idea... and you have them sign the switch letter indicating that liquidating securities was UNSOLICITED.
So, if it were me, I'd have conversations about anything. I'd be very hesitant to recommend any trading ideas or to specifically recommend liquidating securities to fund an insurance product.
Even so, I wouldn't have any problem saying "I'm no longer licensed in that area. However, I would suggest that you take a look at what you've got and see what else is available."
Also, keep in mind that there are laws (I believe) where you cannot make any recommendations the holdings within a 401(k) plan without holding yourself out as an RIA/IAR. Which means that you must charge a fee for your advice to 'activate' that licensing and fiduciary duty on behalf of the plan participant.
Regulators are trying to scare every insurance agent & registered rep from having conversations... and I'm here to say that you can talk about anything... as long as the client clearly understands what their options are and who to go to to make the changes that THEY want.
- Thread starter
- #15
- 8,707
iceco1d said:
Sanctions are a Joke. FINRA is an SRO not a law enforcement agency FINRA can "sanction" anyone but I only need pay a FINRA fine if I want back in under FINRA personally I am more worried about a state securities dept.
I don't think that's true. When you get licensed, you agree to be bound by the rules of FINRA for a period of (I think) 5 years even after giving up your license.
- Thread starter
- #17
- 8,707
FINRA has NO LAW ENFORCEMENT POWERS...The sanctions they give out are 1 of 2 things..
1. Monetary fines - They have no power to collect these fines beyond the fact if you have a fine they can withhold your registration.
2. Withholding your registration for a period of time.
FINRA is an SRO and as such they regulate thier orginization...But if you decide you can live without FINRA there is nothing FINRA can do to you.
Now your states dept of securities or whatever it is called and the SEC are a different matter as those two entities do have law enforcement powers.
I get that. But if you sign a legally binding contract with FINRA, agreeing to be under their jurisdiction for X years after terminating your registration...you're stuck.
Just like if you agree to binding arbitration in an account application. An arbitrator has no jurisdiction over Joe Smith, but if you sign something agreeing to be bound in the future to his/her decision, you're obligated to follow it.
Interesting take though...I'm going to ask my compliance consultant about that.
Just like if you agree to binding arbitration in an account application. An arbitrator has no jurisdiction over Joe Smith, but if you sign something agreeing to be bound in the future to his/her decision, you're obligated to follow it.
Interesting take though...I'm going to ask my compliance consultant about that.
- 11,468
What Norwayguy is saying is that FINRA cannot arrest you.
The SEC and state insurance commissioner's offices can.
All 3 can fine you. All 3 can bar you.
FINRA seems to be a beast of its own.
As far as FINRA liability - I think it's 3 years from the date of the transaction? There's a 2 year rule and a 3 year rule, if I remember correctly. What each time period is, I can't remember. It was on my Series 7 exam, but I've never worried about it since.
The SEC and state insurance commissioner's offices can.
All 3 can fine you. All 3 can bar you.
FINRA seems to be a beast of its own.
As far as FINRA liability - I think it's 3 years from the date of the transaction? There's a 2 year rule and a 3 year rule, if I remember correctly. What each time period is, I can't remember. It was on my Series 7 exam, but I've never worried about it since.
