FINRA Chief Ketchum Calls for Brokers To Better Inform Investors of Fixed Income, Structured Product Risks

Financial Industry Regulatory Authority CEO and Chairman Richard G. Ketchum says that with more investors getting involved in sophisticated investments, broker-dealers must do a more thorough job of informing them of the risks involved in complex financial instruments. Speaking at FINRA’s yearly conference in DC, Ketchum said that now is when brokerage firms should be talking to clients about the possible drawbacks of having concentrated holdings in fixed-income securities that are more speculative or for a longer duration. He also talked about letting clients know that bond funds are not the equivalent of owning fixed securities directly.

Acknowledging that it can be more difficult to train financial advisers on how to make effective disclosures to customers about structured products, Ketchum suggested that using simple language is one way that broker can provide potential investors with more information, rather than just satisfying disclosure requirements. The FINRA chief spoke about how it essential it was to sure that investors have a better comprehension of the risks involved in what they are buying.

Ketchum also scolded financial firms for being more direct when it comes to marketing on their websites than they are with the disclosure and legal sides. He noted that providing investors with disclosures that they don’t fully understand creates more risks for the firms in the long run.

If you invested in a complex instrument that resulted in losses and you believe that your financial representative failed to fully apprise you of the risks involved and/or did not make sure that you thoroughly understood what you were getting involved in, please contact Shepherd Smith Edwards and Kantas, LTD LLP today. You may have been the victim of securities fraud.

Ketchum suggests brokers falling short in discussing risk, Investment News, May 21, 2013


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