On April 5, 2019, FINRA published Regulatory Notice 19-10 (the “Notice”) addressing the responsibilities of member firms when communicating with customers about departing registered representatives. As the Notice indicates, in the event a registered representative leaves a member firm, FINRA aims to avoid any disruption in the service of customer accounts and to ensure that customers can make a “timely and informed choice” about where to maintain their assets. The Notice contains two key points about what is expected of member firms in terms of customer communications when a registered representative departs.
First, the Notice states that firms should have policies and procedures to ensure that customers whose accounts were serviced by a departing registered representative do not experience an interruption in service, and receive information regarding how their accounts will continue to be serviced, including but not limited to: (i) how, and to whom, the customer may communicate questions and trade instructions; and (ii) the representative to whom the customer is now assigned. Firms should thus be prepared to communicate immediately with customers and to relay specific information about who will be handling their accounts in the absence of their prior representative.
Second, the Notice provides that, when registered representatives leave the firm, the firm should provide additional information when asked by customers. If a customer asks a member firm questions about a departing registered representative, the Notice states that the member firm should provide customers with “timely and complete answers” about the departing representative. Addressing an apparent concern that customers may have received distorted or inaccurate information in the past, the Notice states that communications with customers in reference to departing representatives must be fair, balanced, and not misleading.
With respect to information that should be provided if responsive to a customer inquiry, the Notice highlights:
- clarification that the customer may choose either to retain his or her assets at the current firm to be serviced by a new registered representative, or to transfer those assets to another firm; and
- reasonable contact information of the departing registered representative, i.e., a phone number, email address, or mailing address – provided that the representative consented to disclosure of his or her contact information to customers.
Attorneys who counsel registered representatives have long advised representatives to ensure that they provide their new contact information and consent to its disclosure when they resign from their employment. With FINRA’s issuance of Regulatory Notice 19-10, member firms should take the opportunity to review their policies and procedures regarding communications with customers at the time of registered representative departures to ensure that they are compliant with FINRA’s expectations. If there are non-solicitation obligations applicable to the departing registered representatives, employers should consider how these may be impacted, if it all. Further, firms should provide training regarding these policies and expectations to employees whose duties may be impacted by them.
- Member of the Firm