FINRA Podcast: IRA Rollovers - Part 2

FINRA released the second podcast of a two-part series regarding individual retirement account ("IRA") rollovers. The podcast discusses firms' responsibilities, including conflicts of interest when recommending a rollover into an IRA, marketing IRAs, and other related services.

FINRA explained that a representative who recommends rolling over assets into an IRA will typically earn commission, asset-based advisory fees or other fees in connection to the IRA. However, if the representative recommends that the investor leave the plan assets with the old employer or move them to a new employer's plan, the representative will likely not earn any compensation, presenting a conflict of interest for both broker-dealers and individuals making these recommendations.

FINRA recommended that firms review their retirement service activities for potential conflicts of interest, suggesting that firms supervise these activities and have in-place written supervisory procedures designed to ensure that advisors do not confuse investors or interfere with educational efforts. In addition to firm supervision, FINRA recommended that firms train registered representatives to be familiar with retirement options and their implications.

FINRA further stated that firms should be mindful of communications with the public about IRA rollovers. FINRA requires firms to ensure that communications are based on "principles of fair dealing and good faith" and they must provide "a sound basis to evaluate the facts about a security, industry, or service." FINRA reminded firms to not omit any material fact or qualification if that omission would cause the communication to be misleading.

See: FINRA Podcast; FINRA Podcast Transcript.Related news: FINRA Podcast: IRA Rollovers - Part 1 (June 17, 2014).