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FINRA Requires Brokerage Firms to Communicate with Customers when a Broker Leaves the Firmby Andrew Whiteman

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Ask questions if your broker leaves his firm.

According to new regulatory guidance from the Financial Industry Regulatory Authority, known as FINRA, member firms are required to do the following:

  1. In the event of a registered representative’s departure, the member firm should promptly and clearly communicate to affected customers how their accounts will continue to be serviced; and
  2. The firm should provide customers with timely and complete answers when the customer asks questions about a departing registered representative

The new requirements are spelled in Notice to Members 19-10, which was issued on April 5, 2019. The purpose of the new guidance is to ensure that customers can make a timely and informed choice about where to maintain their assets when their registered representative leaves a firm. Customers should not experience any interruption in service as a result of a representative’s departure. Member firms should have policies and procedures in place to assure that customers serviced by a departing registered representative will continue to be serviced, including how and to whom the customer may direct questions and trade instructions and the identity of the representative to whom the customer will be assigned at the member firm.

NTM 19-10 also states that the member firm should “communicate clearly, without obfuscation, when asked questions” by customers about the departing registered representative. Provided the departed representative has consented to disclosure of his or her contact information to customers, the firm must provide the departed representative’s contact information, such as phone number, e-mail address, or mailing address. All information provided by the member firm about the departing representative must be “fair, balanced and not misleading.”

Thus, under NTM 19-10, a member firm (1) must immediately notify customers that their representative has departed and assign a new representative to the customers, (2) may not attempt to hinder or delay customers’ efforts to contact their former registered representative by refusing to provide his contact information when authorized to disclose it, and (3) must provide fair, balanced, and not misleading answers to all customer questions resulting from the representative’s departure.

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