The Financial Industry Regulatory Authority (FINRA) is cracking down on the sales of securities-backed loans to investors. FINRA examiners are likely to ask more questions this year about sales to retail investors of securities-backed loans.
This area is a new addition to the annual Regulatory and Examination Priorities Letter, whose 2018 edition was released on Monday as an aide to help firms focus their growing compliance, supervisory and risk management responsibilities, and serve as a warning to brokers about where FINRA disciplinary actions may occur.
The letter’s “sales practice risks” section zeroed in on Securities Backed Lines of Credit as a new priority area.
According to FINRA, general-purpose loans collateralized by customers’ investment portfolios have “increased significantly in the past years,” and FINRA is further concerned about whether firms are adequately disclosing such risks as “the potential impact of a market downturn, the potential tax implications if pledged securities are liquidated and the potential impact of an increase in interest rates.”
Morgan Stanley paid $1 million last April, 2017 to settle charges that it used sales contests to drum up securities-backed loan sales in several branches in New England. However, these products have been aggressively sold by many brokerage firms.
Our firm is investigating claims against various brokerage firms for the improper sale of securities-backed loans and lines of credit to their customers. If you are an individual or institutional investor who has any concerns about your investments in securities-backed loans or lines of credit, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing a securities arbitration case with FINRA.
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