On Friday, June 20, 2014, the Financial Industry Regulatory Authority (“FINRA”) withdrew its proposed Rule 2243, which would have required disclosure and reporting of FINRA member recruiting practices.  Essentially, the rule would have required disclosure of a recruiting bonus for a representative that exceeded $100,000.  The initial response to the proposed rule was mixed, but FINRA submitted the rule to the Securities Exchange Commission (“SEC”) for approval earlier this year.

In withdrawing the proposal, FINRA cited the rigid timeline for approval under the Dodd-Frank Act and the large number of comment letters submitted to SEC concerning the proposal.  It indicated that it intends to “carefully consider the comments, continue a dialogue with the Commission and file a proposal as soon as practical.”  FINRA also stated that it still believes that recruitment bonuses are an important protection issue for investors.  Opponents, in contrast, have argued that the disclosure of upfront payments and potential future payments are an invasion of the representative’s privacy.  The proposed rule had already affected recruiting of representatives, and its effect on recruiting and privacy should be a major component of FINRA’s efforts to revise and resubmit the proposed rule.