FINRA Warns Firms about Recommending IRA Rollovers
FINRA has issued a Regulatory Notice that it will examine how firms make recommendations concerning IRA rollovers. In particular, FINRA wants firms not to overstate the benefits of a rollover versus leaving assets in an employer plan. Firms must be fair and balanced when talking to clients and ensure disclosure about the benefits of an employer plan including lower expenses, access to planning tools, penalty-free withdrawals, and the ability to hold employer stock. Firms must also disclose their conflicts of interest including fees and commissions received. FINRA also instructs firms to implement an effective supervisory structure, review marketing pieces for fair and balanced disclosure, and train the registered representatives.
OUR TAKE: In other words, if a firm recommends an IRA rollover to a product where the firm or the rep gets paid, the burden of proof will be on the firm to demonstrate to FINRA that it acted in the best interest of the client.