Regulatory Notice 08-81

FINRA Reminds Firms of Their Sales Practice Obligations with Regard to the Sale of Securities in a High Yield Environment

Executive Summary

FINRA is issuing this Notice to remind firms of their obligations in the sale of securities such as bonds, bond funds, structured products and non-conventional investments, in a high-yield environment.1 The yield on many of these instruments in late 2008 reached unusually high levels, which may increase their appeal to some investors. FINRA reiterates the guidance set forth in previous Notices and reminds firms that they are obligated to balance any discussion of yield with an appropriate discussion of the features of these instruments and the risks presented.2

Questions concerning this Notice should be directed to Angela C. Goelzer, Associate Vice President, Investment Company Regulation, at (202) 728-8120.

1 Regulatory Notice 08-82, also issued December 16, 2008, addresses firms' sales practice obligations with regard to cash alternatives.

2 See NASD Reminds Firms of Sales Practice Obligations in Sale of Bonds and Bond Funds, NTM04-30 (April 2004). See also NASD Provides Guidance Concerning the Sale of Structured Products, NTM05-59 (September 2005) and NASD Reminds Members of Obligations When Selling Non-Conventional Investments, NTM 03-71 (November 2003).