FINRA Bears Down on Sales of Complex Securities

The Financial Industry Regulatory Authority (FINRA) will step up its scrutiny of how brokerage firms use financial incentives to help sell complex securities to ensure that the firms and their brokers recommend investments that suit the clients’ need and purpose.

Law 360 (subscriptions required) reports that the industry watchdog will also bear down on potential conflicts of interest involving broker-dealers that develop and sell complicated financial products to investors.

FINRA’s chairman and chief executive Richard Ketchum says it is important that ordinary investors understand the risks associated with complex investment products. Law 360 reports he pointed to complex products such as range accrual notes that track multiple assets, dual-directional notes that have the potential to perform well in both bull and bear markets, and products whose returns are pegged to volatility index futures.

Ketchum says firms also need to ensure that their own employees fully understand the intricacies of complex products as there have been reports that some representatives were ill-informed about the investments they sold.

If you or a loved one were harmed by securities fraud, contact Sokolove Law today for a free consultation and to find out if a securities fraud lawyer may be able to help you pursue legal action.

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