FINRA Report Reviews Broker-Dealer Industry Conflicts Of Interest

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On October 14, FINRA released a report on conflicts of interest in the broker-dealer industry, stating that the report is intended to identify potential problem areas and highlight effective conflicts management practices that may go beyond current regulatory requirements. The report identifies the components of an effective conflicts management framework, which include, for example (i) identifying and managing conflicts on an ongoing basis through an enterprise-level approach that is scaled to the size and complexity of a firm’s business, (ii) establishing new product review processes that provide independent perspectives and identify potential conflicts raised by new products, (iii) minimizing conflicts in compensation structures between customer and broker or firm interests where possible, and (iv) including “best-interest-of-the-customer” standards in codes of conduct that apply to brokers’ personalized recommendations to retail customers.