In April 2013, the SEC, in association with FINRA, held a Compliance Outreach Program for broker-dealers. The program included a panel that addressed sales practices generally, and as they relate to complex structured products.
Consistent with recent regulatory activity, both the SEC’s David Blass and FINRA’s Susan Axelrod highlighted their current focus on the practices surrounding the sale of certain types of structured products to senior citizens. More specifically, Ms. Axelrod, citing the fact that the population is aging, noted that FINRA is currently in the process of gathering information on market practices related to elderly clients.
Industry panelists suggested that very complex products should not be sold to customers above a certain age. Other suggested practices include account monitoring for excessive concentrations of particular product types and certain asset classes, as FINRA has previously advised.
In recent years, many of FINRA’s regulatory actions concerning unsuitable sales of structured products arose in part from unsuitable sales to senior citizens.6 In these cases, for example, the stated investment preferences and risk tolerance of the relevant investors was strikingly different from the products that were offered to them. It is likely that FINRA will continue to focus on sales to seniors as the population ages and as products get more complex.