FINRA Podcast: IRA Rollovers - Part 1

FINRA released the first podcast of a two-part series regarding individual retirement account ("IRA") rollovers. The podcast discusses firms' responsibilities, including suitability concerns, when recommending a rollover into an IRA, marketing IRAs and other related services. FINRA explained that 401ks are the largest source of IRA contributions and will be a focus of FINRA examiners in 2014.

Although IRA recommendations themselves are not subject to FINRA suitability rules, the podcast explained, other FINRA Rules do apply. These include the requirement of fair dealing with customers, just and equitable principles of trade, and fair and balanced communications. FINRA noted that IRA-related recommendations typically involve security recommendations, which "must be suitable for the customer".

FINRA also explained that Registered Representatives must seek and consider specific customer information before making a decision, in addition to using diligence to obtain a customer's investment profile. FINRA noted that it is important for advisers to consider short and long-term consequences when recommending an IRA rollover to a customer. FINRA stated that it does not expect Registered Representatives to be tax experts, but noted that they should be able to "look out for things that may be important to their customer" such as early withdrawal penalties and eventual tax treatment. FINRA explained that some firms do not make IRA recommendations to customers directly, but instead provide educational materials about retirement options. These firms, according to FINRA, should have training programs in place to determine which statements are considered recommendations and could be subject to suitability rules.

See: FINRA Podcast.