Did Your Broker Suddenly Leave and No One Told You?

Apr 17, 2019

FINRA Announces New Standard for Informing Customers about a Broker’s Move to a New Firm Have you ever called your broker only to be told that he or she is no longer with the firm? Have you been reassigned to another broker with no choice in the matter? FINRA has just released a Notice to Members (NTM 19-10) which gives brokerage customers the right to receive truthful information regarding where the departing broker has moved to as well as requiring disclosure to the customers of their rights to move their account to the departing broker’s new firm. https://www.finra.org/file/regulatory-notice-10-19 Additionally, FINRA has emphasized that “a member firm should communicate clearly, and without obfuscation, when asked questions by customers about the departing registered representative. “ Presumably, this could mean that if the broker was fired for a reportable reason, the firm might have an obligation to disclose this to the customers. Registered Representative Departures Registered representatives move with some frequency between member firms and across financial firms under various regulatory jurisdictions, such as investment advisory firms and insurance companies. In addition, registered representatives may leave the financial industry entirely. A registered representative’s departure may prompt customer questions about the departing representative and the status of their accounts following the departure. FINRA recognizes that member firms’ different business models give rise to different approaches to managing the customer relationship, and that the expectations regarding a member firm’s handling of a departing registered representative will vary accordingly. For instance, the departure of a registered representative who works closely with customers in a one-on-one relationship will likely be handled differently than the departure of a registered representative in a customer advisory center model or a group service model. While member firms have flexibility in reassigning customer accounts and communicating with customers about the reassignments, they should provide timely and complete answers, if known, to all customer questions resulting from a departing representative, so that customers may make informed decisions about their accounts. Communications with Customers Customers should not experience an interruption in service as a result of a registered representative’s departure. FINRA understands that decisions about the reassignment of customer accounts, if applicable, are typically made promptly following the departure ofa registered representative. In the event of a registered representative’s departure, FINRA expects that the member firm will have policies and procedures reasonably designed to assure that the customers serviced by that registered representative are aware of how the customers’ account will be serviced at the member firm, including how and to whom the customer may direct questions and trade instructions following the representative’s departure and, if and when assigned, the representative to whom the customer is now assigned at the member firm. In addition, a member firm should communicate clearly, and without obfuscation, when asked questions by customers about the departing registered representative. Consistent with privacy and other legal requirements, these communications may include, when asked by a customer: Clarifying that the customer has the choice to retain his or her assets at the current firm and be serviced by the newly assigned registered representative or a different registered representative or transfer the assets […]

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