FINRA Says Watch Out for "Free" or "No-Fee" Claims for IRAs
By Joe Cicchinelli, IRA Technical Expert
Follow Me on Twitter: @JoeCiccEdSlott
IRA custodians are allowed to charge fees on IRAs, but the fees must be properly disclosed to you. These fees are required to be spelled out in the disclosure statement portion of the custodian's IRA document that you get when you open the IRA.
The Financial Industry Regulatory Authority, Inc. (FINRA) has provided information on the disclosure of fees in communications concerning retail brokerage accounts and IRAs. Regulatory Notice 13-23, dated July 2013, gives guidance on the disclosure of IRA fees in sales and marketing communications of retail brokerage firms. http://www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/notices/p304670.pdf
FINRA is the largest independent regulator of securities firms doing business with the public in the United States. Its core mission, according to its website is “…to pursue investor protection and market integrity, and we carry it out by overseeing virtually every aspect of the brokerage industry.”
In Regulatory Notice 13-23, FINRA stated that some firms’ sales and marketing material emphasizes “free” or “no-fee” claims with respect to IRAs when in fact, fees are charged. They observed overly broad language in sales material of broker-dealer firms that implies there are no fees charged to investors who have accounts with the firm. In other instances, fees that are not charged are highlighted and separated from the disclosure of fees that are charged. In other cases, fees are not discussed or are difficult to determine. FINRA said that these kinds of sales materials can mislead investors and violate FINRA Rule 2210’s requirement to claim or imply that accounts are “free” when in fact there are fees. FINRA Rule 2210 requires that broker-dealer communications be fair and balanced and that they don’t omit material information that would cause them to be misleading.
Content Citation Guidelines
Below is the required verbiage that must be added to any re-branded piece from Ed Slott and Company, LLC or IRA Help, LLC. The verbiage must be used any time you take text from a piece and put it onto your own letterhead, within your newsletter, on your website, etc. Verbiage varies based on where you’re taking the content from.
Please be advised that prior to distributing re-branded content, you must send a proof to email@example.com for approval.
For white papers/other outflow pieces:
Copyright © [year of publication], [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] Reprinted with permission [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] takes no responsibility for the current accuracy of this information.
Copyright © [year of publication], Ed Slott and Company, LLC Reprinted with permission Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.
For Slott Report articles:
Copyright © [year of article], Ed Slott and Company, LLC Reprinted from The Slott Report, [insert date of article], with permission. [Insert article URL] Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.
Please contact Matt Smith at firstname.lastname@example.org or (516) 536-8282 with any questions.