March 31, 2014
The purpose of this letter is to provide the Securities and Exchange Commission with comments on the above referenced proposed rule change which was filed by the Financial Industry Regulatory Authority, Inc. (FINRA) on March 10, 2014.
I am an attorney whose practice is exclusively devoted to the representation of individual and institutional investors in their disputes with the securities industry. Moreover, I am a former President and current Director Emeritus of the Public Investors Arbitration Bar Association (PIABA), am the former Chairman of FINRAs National Arbitration and Mediation Committee (NAMC), am the current Chairman of FINRAs Discovery Task Force Committee (DTFC) and am a former member of the Securities Investor Protection Corporation (SIPC) Modernization Task Force.
It is my personal opinion that the adoption of a new rule, which would provide investors with information that would be material to their decision as to whether to transfer their account to a new firm with which their financial representative has become associated, would be beneficial – if not critical – for public investors.
Notwithstanding the preceding, however, I would suggest that the proposed language in the prospective rule under consideration needs to be modified before it is approved by the staff of the Commission as is set forth below.
First, the predicate level of compensation that would trigger the disclosure obligation should be reduced from $100,000 to $50,000. I would submit that this reduction will more adequately capture the potential conflict of interest that is associated with the solicitation of an account transfer.
Secondly, the proposed language in the prospective rule does not address the all too common situation where two or more registered representatives may collectively solicit the transfer of a customers account as a team which the representatives had previously serviced as a team in their prior firm as well. This presents the potential scenario where an individual representative may not meet the monetary threshold (currently $100,000) but the team of two or more representatives surely would.
Thank you for providing me with the opportunity to submit my comments on this rule filing.