Industry Comments on FINRA’s Disclosure Requirement

FINRA issued Regulatory Notice 10-54 (the Notice) requesting comment on a concept proposal to require broker-dealers, on or before commencing a business relationship with a retail customer, to provide a disclosure document describing in plain English the accounts and services it offers as well as conflicts of interest and any limitations on the broker-dealer's duties to its retail customers.

The Notice envisages the proposed disclosure to be similar in purpose to Form ADV Part II, which is a brochure provided to clients by investment advisers that discloses information about the advisers. The disclosure document was proposed in response to certain requirements set forth in the Dodd-Frank Act. The Act requires the SEC to conduct a study of the regulatory gaps and overlap between investment adviser and broker-dealer regulation. It also requires the SEC to facilitate simple and clear disclosures of material conflicts by both broker-dealers and investment advisers.