FINRA Regulatory Notice on Complex Products – Financial Services

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FINRA recently published Regulatory Notice 22-08, which reminds members of their sales practice obligations for complex products and options and invites feedback on effective practices and rule improvements. The comment period ends on May 9, 2022.

FINRA has a long-standing interest in retail clients purchasing complex products. FINRA is concerned that investors may lack the financial experience to understand the products, the ability to withstand risk, or that the investment may behave unexpectedly under various market or economic conditions. These concerns can be exacerbated when a retail client accesses these products through a standalone platform without the assistance of a finance professional. Although FINRA has previously raised these concerns, the new guidance is timely given the significant increase in trading complex products, the increased number of investors trading these products online, and obligations under higher interest. FINRA is conducting targeted reviews to examine member practices related to options accounts and related areas, including account supervision, communications, and due diligence. FINRA is also interested in hearing from the industry about effective practices developed by members to manage the risks that complex products and options raise, particularly those accessible to self-directed retail investors, and whether the current regulatory framework is adapted to appropriate manner to address concerns raised by complex products. some products.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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