The Grass Is Greener On The Other Side
FINRA Rule 2273 requires delivery of a FINRA-created Educational Communication by the recruiting firm that highlights key considerations for former customers in transferring assets to the recruiting firm, and the direct and indirect impacts of such a transfer on those assets.
FINRA Rule 2273 went into effect on November 11, 2016. It applies only to any registered representative hired by or who associates with the recruiting firm on or after the effective date. The rule requires delivery of the Educational Communication for a period of three months after the registered representative begins employment or associates with the recruiting firm.
FINRA RULE 2273 IS TRIGGERED WHERE THERE HAS BEEN INDIVIDUALIZED CONTACT WITH THE CLIENT.
Individualized contact may include, but is not limited to, oral or written communications by the recruiting firm or registered representative: (1) informing the former customer that the registered representative is now associated with the recruiting firm; (2) suggesting that the former customer consider transferring his or her assets or account to the recruiting firm; (3) informing the former customer that the recruiting firm may offer better or different products or services; or (4) discussing with the former customer the fee or pricing structure of the recruiting firm. Keep in mind, even unintentional communications, such as at a sporting or social event, could trigger the rule.
FINRA RULE 2273 IS ALSO TRIGGERED WHEN A FORMER CUSTOMER TRANSFERS THEIR ASSETS TO THE RECRUITING FIRM, EVEN ABSENT AN INDIVIDUALIZED CONTACT.
FINRA would consider a transfer absent individualized contact to occur when a former customer decides to transfer assets to the recruiting firm: (1) on his or her own initiative; (2) in response to a general advertisement; (3) in response to a general posting on a social media website; or (4) after learning of the registered representative’s transfer from another former customer.
FIRMS SHOULD HAVE POLICIES AND PROCEDURES IN PLACE TO ENSURE THE EDUCATIONAL COMMUNICATION IS SENT WHEN FINRA RULE 2273 IS TRIGGERED.
Contact us today for more information on how we may assist you in complying with this rule.
Author Bio
Leila Shaver is the Founder of My RIA Lawyer, a law firm that provides compliance and legal consulting for financial institutions. With extensive experience as a securities attorney and compliance expert, she has served as Chief Compliance Officer and General Counsel to RIAs, BDs, and TAMPs with billions in assets under management.
Leila understands the challenges RIAs face and is committed to helping RIAs streamline their processes, mitigate risks, and ensure compliance with regulatory requirements. She received her Juris Doctor from Atlanta’s John Marshall Law School and is a West Georgia Young Lawyers’ Association member. Leila has received numerous accolades for her work, including the Carroll County Bar Association’s Outstanding Young Lawyer Award in 2017.