UBS Securities LLC appreciates the opportunity to comment on FINRA's proposal to adopt a new FINRA Rule 2267 (" Investor Education and Protection") based on consolidation of existing NASD Rule 2280 which would require member firms, with certain exceptions, to provide customers with FINRA's Web site address and information regarding FINRA's Broker check program at least once every calendar year.
The proposed rule would continue to benefit retail investors who transact business with member firms by providing in writing or electronically, disclosures to customers regarding FINRA's BrokerCheck Hotline Number, FINRA's website address, and a statement as to the availability to the customer of an investor brochure that includes information describing FINRA BrokerCheck. Retail investors generally choose to transact with the assistance of a broker because they rely heavily on the recommendations they receive from their brokers.
However, we believe that an exception should be provided under the proposed rule for member firms that predominately transact business with institutional investors. Member firms that transact their business with institutional investors do not have brokers that work to sell securities to individual investors. Institutional customers are generally sophisticated registered or regulated entities such as banks, mutual funds, insurance companies, hedge funds, and pension funds that are familiar with the FINRA, and should not require the same levels of disclosure as retail investors. At a SIFMA Legal and Compliance Conference in March 2007, with regards to rule consolidation, Mary Shapiro noted that "it is important to lose the blinders of one-size-fits-all rule making. That includes making a clearer distinction in the rule set between retail and institutional investors". Additionally, this view was echoed by Rick Ketchum stating, "that exercise is the perfect time to rethink the regulation differences for broker-dealers conducting retail versus institutional business." Alternatively, to the extent that FINRA adopts the proposed rule, we request that the required disclosures be made to institutional investors only at the time of account opening in lieu of at least once every calendar year.
Should you have any questions or require additional information, please feel free to contact Mia Edwards, Head of Compliance, UBS Investment Bank, at (203) 719-0283, Albert Lucks, Head of Logistics Compliance, UBS Investment Bank, at (212) 821-4729 or myself.
David I. Futter
Counsel to Americas Head of Compliance
UBS Investment Bank
One Stamford Forum
Stamford, Connecticut 06901