Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, November 15, 2011

FINRA Finds Widespread Use of Senior Designations and Issues Additional Guidance

A pervasive regulatory problem is the use by securities professionals of certifications or designations that imply expertise in advising senior investors (senior designations).  Many of these senior designations are, in fact, little more than marketing gimmicks.  For this reason, FINRA has regularly reminded broker-dealer firms of their obligations to supervise their registered representatives' use of certifications that imply expertise in the area.  FINRA recently released survey results that point to the widespread use of senior designations among broker-dealers.  Specifically, 68% of firms that completed the survey indicated that they allow the use of senior designations.  Of the firms that permit the use of senior designations, 88% currently have registered persons who use senior designations.  Of these, 66% require approval and verify credentials, 23% require approval but do not verify credentials, and 11% do not require approval and do not verify credentials.

FINRA noted that in certain instances senior designations approved by firms or widely used by registered persons did not require rigorous qualification standards.  This is of concern to FINRA since "[i]nvestors are unlikely to differentiate between designations that represent an enhanced level of proficiency in dealing with financial matters relevant to senior investors versus a designation that is simply a marketing tool."

The  Regulatory Notice goes on to highlight sound practices currently used by some firms and to encourage firms to adopt procedures to strengthen their own supervisory procedures.

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