Timothy Shanahan Comment On Regulatory Notice 22-08
Timothy Shanahan
N/A
Compass Capital Corporation appreciates the opportunity to comment on Regulatory Notice 22-08 published by the Financial Industry Regulatory Authority (FINRA). We support FINRAs investor protection mission and commend FINRA for reminding members of their current regulatory obligations. However, we are deeply concerned that FINRA is considering a series of radical and unprecedented regulations that could prevent or deter our clients from accessing a broad range of public securities deemed complex. If adopted, these regulations would upend our long-standing disclosure-based regulatory system and interfere with financial professionals ability
to choose investments that are right for our clients. These regulations could hurt our clients by depriving them of access to valuable investments for their portfolios, be costly to implement, and impose substantial additional and unnecessary compliance burdens. We therefore strongly urge FINRA not to adopt any of the measures set forth in the Notice.
FINRA's POTENTIAL REGULATIONS WOULD UPEND OUR DISCLOSURE-BASED REGULATORY SYSTEM
For almost 90 years, Americas successful securities laws have been based on providing accurate disclosures, not regulators picking and choosing who can invest in what securities. FINRAs proposed regulations are at odds with this system which gives financial professionals to freedom to choose investments that are right for their clients and for investors to make their own investment decisions.
Public securities should be available to all. Regulations that deny or impose restrictions or limits on the right to buy public securities are contrary to our disclosure-based system. FINRA is not a merit regulator and should not be deciding which public securities we can recommend to our clients or interfere with their ability to buy the public securities they deem in their best interest.
FINRAs POTENTIAL REGULATIONS COULD HARM OUR CLIENTS
FINRAs measures could apply to dozens of popular securities that provide important benefits to our clients and other investors, including portfolio diversification and protection from downside risk. They could restrict investor choice and access to valuable investments that could help our clients achieve long-term financial goals.
Our clients benefit from these products as we build portfolios using many sources of risk and reward.
Brokers should not be required to put clients through special processes like passing a test, sitting out cooling off periods
or demonstrating net worth before they are permitted to invest in public securities. It is our job to understand the securities that we recommend. Testing and net worth standards can be subjective, biased, and discriminatory and could unfairly disadvantage our clients.
FINRAs POTENTIAL REGULATIONS ARE UNNECESSARY
The Notice doesnt actually put forth any evidence to justify the extreme measures it is considering or explain why problems, to the extent they exist, are not adequately addressed by Regulation Best Interest (Reg BI) and other applicable laws and regulations. Reg BI, along with other regulations and guidance, is sufficient to protect investors acting on recommendations.
Moreover, FINRA has not identified evidence that investors misunderstand complex products.
FINRAs POTENTIAL REGULATIONS COULD ADD SIGNIFICANT COSTS TO OUR BUSINESS OPERATIONS
This Notice contemplates adding an additional and unnecessary layer of regulation just a few years after the adoption of Reg BI. In addition, the vague and arbitrary standards in the Notice, if adopted, would be open to second-guessing from regulators and investors, which would likely increase our regulatory, reputational, and litigation risk, and incentivize some firms to eliminate
complex products from their platforms.
The testing and other measures contemplated by the Notice could be enormously expensive and difficult to develop and administer. Lack of uniform testing standards would exacerbate these issues. The additional administrative and compliance would likely be particularly burdensome for smaller firms.
CONCLUSION
For the reasons above, we strongly urge FINRA to reconsider the proposed regulations discussed in the Notice.
FINRA should not be a merit regulator determining what securities people can buy or who can buy them.
Timothy Shanahan Comment On Regulatory Notice 22-08
Compass Capital Corporation appreciates the opportunity to comment on Regulatory Notice 22-08 published by the Financial Industry Regulatory Authority (FINRA). We support FINRAs investor protection mission and commend FINRA for reminding members of their current regulatory obligations. However, we are deeply concerned that FINRA is considering a series of radical and unprecedented regulations that could prevent or deter our clients from accessing a broad range of public securities deemed complex. If adopted, these regulations would upend our long-standing disclosure-based regulatory system and interfere with financial professionals ability
to choose investments that are right for our clients. These regulations could hurt our clients by depriving them of access to valuable investments for their portfolios, be costly to implement, and impose substantial additional and unnecessary compliance burdens. We therefore strongly urge FINRA not to adopt any of the measures set forth in the Notice.
FINRA's POTENTIAL REGULATIONS WOULD UPEND OUR DISCLOSURE-BASED REGULATORY SYSTEM
For almost 90 years, Americas successful securities laws have been based on providing accurate disclosures, not regulators picking and choosing who can invest in what securities. FINRAs proposed regulations are at odds with this system which gives financial professionals to freedom to choose investments that are right for their clients and for investors to make their own investment decisions.
Public securities should be available to all. Regulations that deny or impose restrictions or limits on the right to buy public securities are contrary to our disclosure-based system. FINRA is not a merit regulator and should not be deciding which public securities we can recommend to our clients or interfere with their ability to buy the public securities they deem in their best interest.
FINRAs POTENTIAL REGULATIONS COULD HARM OUR CLIENTS
FINRAs measures could apply to dozens of popular securities that provide important benefits to our clients and other investors, including portfolio diversification and protection from downside risk. They could restrict investor choice and access to valuable investments that could help our clients achieve long-term financial goals.
Our clients benefit from these products as we build portfolios using many sources of risk and reward.
Brokers should not be required to put clients through special processes like passing a test, sitting out cooling off periods
or demonstrating net worth before they are permitted to invest in public securities. It is our job to understand the securities that we recommend. Testing and net worth standards can be subjective, biased, and discriminatory and could unfairly disadvantage our clients.
FINRAs POTENTIAL REGULATIONS ARE UNNECESSARY
The Notice doesnt actually put forth any evidence to justify the extreme measures it is considering or explain why problems, to the extent they exist, are not adequately addressed by Regulation Best Interest (Reg BI) and other applicable laws and regulations. Reg BI, along with other regulations and guidance, is sufficient to protect investors acting on recommendations.
Moreover, FINRA has not identified evidence that investors misunderstand complex products.
FINRAs POTENTIAL REGULATIONS COULD ADD SIGNIFICANT COSTS TO OUR BUSINESS OPERATIONS
This Notice contemplates adding an additional and unnecessary layer of regulation just a few years after the adoption of Reg BI. In addition, the vague and arbitrary standards in the Notice, if adopted, would be open to second-guessing from regulators and investors, which would likely increase our regulatory, reputational, and litigation risk, and incentivize some firms to eliminate
complex products from their platforms.
The testing and other measures contemplated by the Notice could be enormously expensive and difficult to develop and administer. Lack of uniform testing standards would exacerbate these issues. The additional administrative and compliance would likely be particularly burdensome for smaller firms.
CONCLUSION
For the reasons above, we strongly urge FINRA to reconsider the proposed regulations discussed in the Notice.
FINRA should not be a merit regulator determining what securities people can buy or who can buy them.