A recent alert published on July 31, 2019 from the North American Securities Administrators Association (“NASAA”) reminds firms of the importance of ensuring that registered representatives are knowledgeable about the products that they are engaged in marketing. While the NASAA report specifically focuses on the findings related to firms’ activities with leveraged and/or inverse ETFs, the whitepaper provides a good supervisory framework to apply to all products and activities. It reminds broker-dealers and supervisory personnel that representatives must have a good understanding of the products they offer, investor investment objectives, and long term goals. Firms must ensure that they have appropriate policies and procedures related to specific products in their written supervisory programs and have an adequate training program for individuals engaged in developing marketing material and marketing products.
Firms considering permitting their registered representatives to offer leveraged and/or inverse ETFs or other niche, novel or complicated products should conduct an analysis to ensure that their supervisory procedures are adequately tailored to address and mitigate risk.
This article is not a solicitation of any investment product or service to any person or entity. The content contained in this article is for informational use only and is not intended to be and is not a substitute for professional financial, tax or legal advice.