FINRA’s Emerging Regulatory Issues Office is closely monitoring new financial products marketed by firms in recent years. Laura Gansler shared that while FINRA encouraged innovation, products that are complex and hard to understand by investors (and perhaps the registered representatives who sell them) are getting increased attention. The problem, according to Gansler, is that products that were once only marketed to institutional clients have been made available to retail investors, citing hedge funds and funds of hedge funds as examples. She mentioned that FINRA has investigated the processes firms use to vet new products and published a list of best practices for firms to follow, NASD NTM 05-26, http://www.finra.org/Industry/Regulation/Notices/2005/p013756. She encouraged all arbitrators to review these best practices.
Gansler also expressed concerns about investments sold to seniors, noting Variable Life Settlements as an example because “the market is opaque and the product is complicated.” Gansler and Feinberg also referred to the larger problem of registered representatives improperly marketing themselves with titles such as “Certified Senior Specialist.” FINRA advised arbitrators that such titles often do not represent real credentials