Articles Tagged with Conflicts of Interest

The Financial Industry Regulatory Authority has sent a targeted exam letter seeking to examine possible conflicts of interest in the way firms pay brokers. About a dozen brokerage firms received the letter, which the regulator said is aimed at gathering information as opposed to seeking out violations.

In its letter, the self-regulatory organization inquires about each firm’s different compensation practices, including common payout grids, mutual fund fees, and recruiting incentives. FINRA also wants to know about any compensation that firms may receive from product sponsors and how certain products are promoted. It also wants to learn about production thresholds that allow certain brokers to get bonuses and more compensation for additional revenue earned, improved compensation tied to revenue from certain product types, and policies for monitoring conflicts of interest as they relate to compensation.

FINRA Executive Vice President of Regulatory Operations/Shared Services Dan Sibears said that the SRO is conducting the sweeps to see if firms are properly managing conflicts of interest or if additional guidance needs to be issued. Enforcement actions typically do not result from this type of sweep unless egregious violations are discovered.

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