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ADISA Comments on FINRA Regulatory Notice 22-08 (Complex Products and Options)

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In the body of RN 22-08, FINRA reiterates and updates its views of “complex products” and reminds firms of the framework that they should utilize when making such products available – whether through recommendation or otherwise – to their clients and customers.

ADISA’s membership includes member firms as well as firms that create, manage and distribute investment products that fall within FINRA’s definition of complex product, and ADISA’s comment letter, drafted by ADISA’s Legislative & Regulatory Co-Chair John Grady, ABR Dynamic Funds, addresses what we see as the potentially unwonted and certainly undesirable effects emanating from the approach that FINRA currently takes and is considering expanding. In ADISA’s view, advocating for more comprehensive training and oversight efforts within members’ firms that offer complex products may well lead to the creation of a two-tiered system within members’ firms – one for complex products, and another for non-complex products. In addition, adding to the requirements already announced by FINRA will only further restrict or limit the offer and sale of these important and necessary products, products that address risks and seek to produce outcomes that are desired by investors.

At bottom, explicitly identifying products as “complex” and imposing new and additional requirements regarding their offer and sale suggest that such products operate outside of applicable disclosure parameters and documents, irrespective of their effectiveness. For these reasons, ADISA believes that FINRA should be extremely cautious about how it defines and enforces rules, guidelines and suggestions relating to investment products that go beyond simply exposure to publicly traded stocks and bonds.

You can read the comment letter in its entirety here.