FINRA “Encourages” BD Intermediaries to Cooperate with Pay-to-Play Info Requests
FINRA has issued an Information Notice to its members encouraging cooperation with investment advisers to funds required to comply with the new pay-to-play rule. The SEC’s pay-to-play rule requires advisers to funds to determine whether any investors include certain government entities. In many cases, only broker-dealer intermediaries whose clients invest through omnibus accounts have this information. FINRA “encourages firms to make reasonable efforts to cooperate with investment advisers seeking information to comply with the requirements of Rule 206(4)-5.”
OUR TAKE: We think FINRA should require cooperation, not just encourage it. How else will fund sponsors monitor government entity investors subject to the pay-to-play restrictions?