The Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 11-52 (Notice) reminding its member firms of their supervisory obligations regarding the use of designations by their brokers that imply expertise, additional training or a specialty in advising elderly investors (senior designations).
In early 2011, FINRA surveyed 157 brokerage firms regarding the use of senior designations and the supervisory procedures in place regarding the use of such designations. 68% of the firms surveyed indicated that they permit the use of senior designations. Of those, only 66% required approval and verification of a broker’s credentials prior to the use of the designation. The remaining 34% of firms did not verify the credentials of the brokers using the senior designation. In some instances, widely used senior designations did not require rigorous qualification standards.
According to the Notice, FINRA is particularly concerned that “the existence of qualification standards to obtain a designation did not ensure that those registered persons holding the designation possessed financial services skills that were unique or valuable to senior investors.”
The Notice reminds brokerage firms that they must have supervisory procedures in place to ensure fair dealings with senior investors, as well as to prevent the unethical or misleading use of senior designations.