FINRA Warns Brokers Marketing

By Hal M. Bundrick

NEW YORK ( MainStreet)--The marketing of "free" or "no fee" brokerage and IRA accounts is gaining the attention of FINRA, the U.S. securities firm regulator.

"Broker-dealers' marketing campaigns often emphasize that fees are not charged in connection with their retail brokerage accounts and IRAs," the regulator says in an advisory notice to firms. "Nevertheless, while certain types of fees may not be charged, others will be."

FINRA notes that such accounts may be subject to fees for opening, maintaining or closing accounts, as well as additional charges such as brokerage commissions, management fees and other product-level expenses. The agency adds that "some broker-dealers' communications that discuss fees may not be fair and balanced, and could be misleading."

Firms have been advised that if an account has maintenance and closing fees or investment or brokerage service fees, a disclaimer should accompany the marketing of the accounts. FINRA says an advertising message such as "Start investing for less with no account opening fees" would not comply with marketing rules. The regulator says the claim could be compliant, however, if it explained the other fees that could apply. For example, FINRA says the following modified claim may be fair and balanced: "Start investing for less with no account opening fee. Other account fees, fund expenses, brokerage commissions and service fees may apply."

Footnotes or small disclaimers containing such information will not likely provide adequate disclosure, according to the regulator. "A headline statement to the effect that a firm does not charge annual maintenance fees should include an explanation in close proximity to the headline of the conditions associated with the offer and the other fees that would apply," states the FINRA advisory.

A Google search for "no fee IRA" shows results including a sponsored ad by Fidelity for a "No-Fee IRA," a Scottrade ad for "a range of IRAs with no fees," and a Merrill Lynch ad for a "No Fee IRA Account."

--Written by Hal M. Bundrick for MainStreet

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