FINRA Requests Comment on Proposal to Require Disclosure Statement to Retail Investors


The Financial Industry Regulatory Authority released a notice requesting comment on its proposal that would require member firms at or prior to commencing a business relationship with a retail customer to provide a written statement to such customer describing the types of accounts and services it provides, potential conflicts associated with such services and any limitations on the duties the firm otherwise owes to retail customers.

Before the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted, FINRA was already considering whether to implement a heightened standard of care with respect to broker-dealers. FINRA’s staff concluded that retail customers would benefit from an up-front disclosure document that sets forth in plain English a firm’s accounts and services, its associated conflicts of interest and any limitation on duties owed to its customers. FINRA’s disclosure statement would serve a purpose similar to that of a Form ADV, which is required under the Investment Advisers Act to be provided to each advisory client.

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