Tuesday, May 21, 2013
FINRA calls for conversations
Recently, the Chief Executive if the Financial Industry Regulatory Association (FINRA) is encouraging brokers to explain to clients the risk of bond funds.
This quote from a 5/21/13 Wall Street Journal report:
"In the fixed-income market, for example, many investors are moving to longer-duration or high-yield fixed-income products, Finra Chief Executive Richard Ketchum said in a speech at the regulator's annual conference in Washington, D.C.
While not purporting to have a crystal ball, "it is clear that interest rates have far more room to go up than down and that history would tell us that, in this environment, the quality of non-investment-grade bonds and similar products able to be floated is likely to go down," Mr. Ketchum said. "It's a great time to have conversations with your clients about the risks and possible negative scenarios of concentrated holdings in longer-duration or more speculative fixed-income securities."
I cannot recall, I may be wrong, another instance where the Chief advised brokers how to warn investors.
FINRA regulates brokers. The Chief is advising brokers to explain to investors the difference between owning a bond fund and owning an actually fixed-income investment.
I find it remarkable that this needs to be done at all. I took the Series 7, broker's license, in the late-1980's. I think we needed to know the difference then. Why does this need to be reinforced?? I find that concerning.
The questions it raises are: Is this an effort to stop potential investor complaints?, Is this an effort to provide training and information not previously provided?
It just makes me wonder.