Tags: Regulations

If you are an independent financial advisor, stock broker, wealth manager or other financial professional, you are no doubt familiar with the Financial Industry Regulatory Authority, better known as FINRA. This powerful watchdog group has the power to create new regulations, crack down on shady practices among financial professionals and institute new protections for the investing public.

The priorities of FINRA can have profound implications for anyone in the financial planning industry, so staying abreast of what they are doing and where they are focusing their energies is always a smart thing to do. No matter what your role in the financial industry, you never want to find yourself blindsided by the actions of FINRA or other regulatory agencies.

FINRA'S Top Priorities for 2017

The start of a new year is always a good time to make plans for the months ahead. As 2017 gets underway, it is time to take a look at what FINRA has in store, and where the watchdog agency is seeking to accomplish before December 31 rolls around.

#1. Protecting Our Senior Citizens

The new year may have just gotten started, but it is already clear that protecting the interests of seniors will be a top priority in 2017. Protecting senior citizens has always been a major focus at FINRA, but the agency is expected to ramp up its efforts even further in the year to come.

While the protection of senior citizens and older investors covers a lot of ground, you can expect to see more scrutiny of investment seminars, especially those that offer a free meal or other enticements to attract attendees. While these so-called free lunch and free dinner seminars can be highly effective and mutually beneficial, some less than honest brokers have used them to push unsuitable and overpriced investments. As a result, they have drawn the attention of the folks at FINRA, and that focus is expected to get more intense in the year to come.

#2. Keeping an Eye on High-Risk Strategies

Keeping a lid on high-risk investment strategies and preventing them from getting out of control is another major focus of FINRA for 2017. It should come as no surprise that FINRA would be concerned about risk in the financial industry; it was, after all, high levels of risk that almost brought down the global economy less than ten years ago.

Now that the economy, and the stock market, have recovered from the Great Recession, some brokerage firms and individual financial professionals are once again engaging in high-risk behaviors, leveraging their investments, making potentially dangerous bets and ultimately putting the best interests of their clients on the line.

FINRA has noticed this increase in risk-taking behavior, and they are planning to take action in 2017. Hopefully, your firm is not engaging in any of these high-risk behaviors, but if it is, now is a good time to make some changes.

#3. Cracking Down on Excessive Trading

Every experienced investor knows that the stock market is a long-term investment. While successful day traders do exist, the vast majority of stock market investors are focused on the next 30 years, not the next 30 days or the next 30 minutes.

Most stockbrokers and other financial professionals share this long-term view of the stock market, but some violate the trust of their clients and engage in risky short-term trading practices. FINRA has taken note and served notice to brokers everywhere that they will be watching.

When 2017 began, FINRA communicated its intention to crack down on short-term approaches and excessive trading in what should be long-term investments. If you have not already done so, now might be a good time to educate your clients on the difference between sound long-term investing and risky short-term trading practices.

#4. Focus on Product Suitability

The suitability of investment products is expected to be another major FINRA focus in 2017. The suitability standard has gained even more importance as a result of the new fiduciary rule, and financial professionals should expect both sets of standards to be strictly enforced in 2017.

It is easy to see why the suitability of investments and financial advice is such a big focus for the folks at FINRA. If you have been in the industry for awhile, you have probably heard the horror stories - like the 90-year-old couple who were sold an annuity with a 20-year surrender term, or the 80-year-old widower with the bulk of her money in penny stocks. While those are extreme examples, they are also prime examples of what FINRA will be looking for in the year ahead.

#5. The Retention of Records

The retention and proper handling of electronic records have always been a major concern for those in the financial industry, but FINRA is stepping up compliance measures in a big way. As 2017 gets underway, you should expect to see a greater focus on record retention, especially as it relates to social media postings other forms of electronic communications.

As FINRA has recently pointed out, the communication records of brokerage firms, wealth management agencies and individual financial advisors are subject to existing retention regulations, regardless of the medium used or the venue where that communication took place.

As financial planning firms expand their reach online and reach out through social media channels, FINRA will be watching for violations of the record retention requirements. Expect to see a lot more educational outreach in 2017, as the owners of financial planning firms and brokerages work to ensure their compliance and train their staff on the proper use of social media and the importance of proper record retention.

FINRA plays an important role in the financial planning industry, keeping individuals and firms honest and ensuring the highest levels of client service and accountability. This powerful watchdog agency is constantly evaluating the current risks and looking for ways to make investing simpler, and safer, for individuals and corporations. By outlining its biggest priorities for 2017, FINRA is signaling its intentions to the financial industry, and they need to take notice.
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Disclaimer

The above article is meant for information purposes only and is not intended in any way to provide legal or other advice for any specific situation.  Readers always should consult their own tax, accounting and legal advisors before taking any action related to the above article or subject matter.

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