As previously reported on NAPA Net, FINRA approved a proposal requiring brokers to disclose recruitment compensation paid to them as an incentive to move to a new firm. The proposal will be submitted to the SEC for review and approval.
Three types of payments would trigger disclosure:
1. Recruitment payments of $100,000 or more for:
• Signing bonuses
• Upfront of back-end bonuses
• Loans
• Accelerated payouts
• Transition assistance
2. Future payments based on performance
3. Increases in total compensation of either 25% or $100,000-plus
The payments would have to be disclosed in three ranges: $100,000-$500,000, $500,000-$1 million, and more than $1 million.
FINRA Chair and CEO Richard Ketchum commented, "This proposal is about making sure the customer can make a fully informed decision to follow a broker to a new firm and understand the costs associated with transferring his or her account. This proposal reflects our commitment to transparency and investor protection."
In an interesting twist, FINRA revealed the news through Twitter. Turns out that FINRA has been an early adopter to social media. Go figure.
