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Rollover of Brokerage Accounts to Fee Based Advisory Accounts

The Financial Industry Regulatory Authority (FINRA) is cracking down on the rollover of retirement accounts and other brokerage accounts to fee-based advisory accounts. FINRA examiners are likely to ask more questions this year about the timing of and recommendations to switch these accounts.

This area is a new addition to the annual Regulatory and Examination Priorities Letter, whose 2018 edition was released on Monday as an aide to help firms focus their growing compliance, supervisory and risk management responsibilities, and serve as a warning to brokers about where FINRA disciplinary actions may occur.

The letter’s “sales practice risks” section focused on the rollover of retirement accounts from brokerage accounts to advisory accounts as a new priority area.

FINRA said it is closely watching the timing of recommendations to move customers from traditional commission-based brokerage accounts to fee-based advisory accounts, a twist on the issue of reverse churning that other regulators have identified as an issue for buy-and-hold clients.

“FINRA will review situations in which registered representatives recommend a switch from a brokerage account to an investment advisory account where that switch clearly disadvantages the customer, such as where the registered representative recommended that the customer purchase a securities product subject to a front-end sales charge in a brokerage account and then shortly thereafter recommended that account be transferred to a fee-based account,” the exam priorities letter said.

Our firm is investigating claims against various brokerage firms for the improper rollover of accounts from brokerage to advisory account. If you are an individual or institutional investor who has any concerns about the rollover of your retirement or other accounts from brokerage to fee-based advisory accounts, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing a securities arbitration case with FINRA.

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