- Why is FINRA collecting information from firms on New Products? What will it do with this information?
FINRA is collecting information on new products from firms in order to stay abreast of new developments in the industry. The information FINRA receives will be reviewed for new developments and trends. In addition, it will be shared with the exam team in advance of an examination.
- How often will firms receive this inquiry?
Firms will receive this inquiry on an annual basis.
- What is the definition of a new product? What is considered a material change?
The definition is:
New Product Manufactured:
New or innovative products that your firm has developed:
- Products that are new to the industry, or that the firm is one of the first to introduce to the market (including indices);
- Existing products with novel and/or material modifications, such as the addition of innovative structural elements (e.g., protection features, novel asset class), a conversion of a traditional institutional product for sale to retail investors, etc.
New Product Distributed:
New products that your firm has started selling:
- "New" products that your firm is selling for the first time.
- Existing products that have gone through a novel and/or material modification, such as: the addition of innovative structural elements (i.e., protection features, novel asset class), a conversion of a traditional institutional product for sale to retail investors, etc.
We are not seeking to collect information on every product that your firm offers. For instance, in the case of mutual funds, we are not asking you to list every new mutual fund that your firm makes available to investors. If you have been offering, for example, emerging markets funds we do not want you to include a newly-added emerging markets fund that is substantially similar to those already on your platform. We are interested in learning about new types of products that your firm is distributing for the first time, such as a new type of mutual fund that entails different risks or offers exposure to new strategies or asset classes than the funds you currently offer. Floating-rate senior loan funds, mutual funds investing in private company shares, or managed futures mutual funds may be examples of funds that meet the "new" criteria.
Our goal is to stay abreast of new product trends and any significant changes made to existing products as part of our overall monitoring. Defining "new or innovative" and "novel and/or material modifications" is challenging and we realize that these terms could be interpreted differently by firms. We have purposely avoided being too specific, as we'd like to ensure that we capture a wide range of products. If you are unsure of whether to include certain products or not, please contact the persons listed at the end of this document.
- Is FINRA interested in only those products that have been approved and launched for sale? Or are we also interested in the products that are in the pipeline?
FINRA is requesting information on products that are in the latter stages of the firm's products pipeline. These are products that have been approved by the firm but are still in the process of being launched for various reasons (e.g., development of required technology infrastructure, pending product training, etc.)
Given the annual frequency of this inquiry, we are asking for information on these pipeline products where launch is imminent.
- For manufacturer inqiries, is FINRA interested in new or innovative products manufactured by the broker/dealer only? Or is FINRA also interested in products manufactured by other parts of the organization/enterprise?
In addition to the new or innovative products manufactured by the broker/dealer (BD), we are also interested in products that are manufactured by other (non-BD) parts of the overall corporate enterprise but distributed by the BD. Similarly, if the new products vetting process takes place elsewhere within the enterprise (for example, at the bank or corporate level) but a product subject to that process will be sold by the BD, we would want those products to be included in the firm's response. For example, if a bond with a new structure or collateralized by an asset type not previously used was underwritten by a firm's foreign subsidiary, but sold by the U.S. broker-dealer, we would consider this a product that should be included.
- For distributor inquiries, what is the additional "trend information" that FINRA is seeking?
While the inquiry seeks specific data on new products sold by the firm over the last year, we are also interested in any sales trends that the firm may have has observed during the same time frame. We are requesting firms to provide us with any trend information (quantitative and qualitative) with respect to its product sales (e.g., shift of a product's sales from institutional to retail buyers, unusual growth in demand for a particular product category). We will subsequently schedule one-on-one calls with the firm to discuss this trend information.
- What is the timeline for which FINRA is gathering product information from firms?
We are generally looking for a 12-month timeframe. However, it will vary depending on when the firm has had its last examination. Please verify the exact timeframe with your firm coordinator.
- How much time do firms have to submit a completed inquiry?
We expect firms to complete and submit the inquiry to FINRA within three weeks.
- For questions and/or clarifications, please contact FINRA's Office of Emerging Regulatory Issues: