The Financial Industry Regulatory Authority (FINRA) recently issued some expectations/guidance to industry members on FINRA’s expectations when a broker leaves for another firm. Specifically, on April 5, 2019, FINRA issued Regulatory Notice 19-10, which instructs/reminds FINRA member firms to: (1) promptly and clearly communicate to customers how their accounts will continue to be serviced when the broker servicing the customer leaves for another firm; and (2) if requested by the customer, provide customers with timely and complete answers, if known, to questions about a departing broker.
Under this new guidance, FINRA expects member firms to implement policies and procedures that “assure that the customers serviced by that registered representative are aware of how their account will be serviced at the member firm, including how and to whom the customer may direct questions and trade instructions following the representative’s departure and, if and when assigned, the representative to whom the customer is now assigned at the member firm.” This “guidance” should not come as a shock to anyone since most firms already have a protocol in place for when a broker leaves the firm. Still, Notice 19-10 is a good reminder that all “protocols” and “procedures” should be tested and updated from time to time in order to make sure they comply with FINRA rules and are achieving the desired results.
The second part of Notice 19-10, however, is somewhat new and, as such, firms should make sure that their policies and procedures allow them to “communicate clearly, and without obfuscation, when asked questions by customers about the departing registered representative . . . [and] when asked by a customer . . . [provide the] . . . phone number, email address or mailing address of the departing representative.” Additionally, as with all customer communications, FINRA expects that the information provided by firms about a departing broker be “fair, balanced and not misleading.”
Notice 19-10 does not discuss what, if any, impact these guidelines/expectations should or will have on non-competition and non-solicitation agreements. It is worth noting, however, that Notice 19-10 specifically applies only “when asked by a customer” and is only directed at the member firm. Put another way, Notice 19-10 is not directed at the departing broker and, therefore, does not address what a departing broker can, cannot or should do when he/she leaves a firm.
We will continue to monitor Notice 19-10 and its impact on broker departures.