FINRA Reminds Firms about Obligations Regarding Pension Income Stream Products

WASHINGTON–(BUSINESS WIRE)–#investor–The Financial Industry Regulatory Authority (FINRA) today issued a regulatory
providing guidance on member firms’ responsibilities
concerning the sale of pension income stream products, which typically
are contracts that provide a lump-sum payment to a pensioner in exchange
for the rights to future pension income payments.

“Pension income stream products are complex and potentially present a
number of investor-protection issues, such as significant commissions,
lack of liquidity, and inadequate disclosure of how these contracts
actually work, including risks for the pensioner,” said Richard Ketchum,
FINRA Chairman and CEO. “FINRA member firms need to be mindful of their
obligation to properly assess these products and supervise their sale to

According to the notice, a determination of whether a particular pension
income stream product is a security depends on the facts and
circumstances specific to that product. However, there can be
significant consequences if a firm incorrectly treats a pension income
stream product as not being a security. For example, the firm may
incorrectly treat it as an outside business activity rather than a
private securities transaction, and thus fail to supervise sales of the
product as required. The firm may also violate qualification and
registration requirements if representatives selling the products are
not qualified and registered to do so.

In addition, the notice states that firms would be well advised to adopt
special procedures and training to ensure that representatives selling
pension income stream products understand the features and whether they
meet the needs of a customer. Firms also may choose to prohibit the sale
of all pension income stream products, or maintain a list of those they
find acceptable. Firms should ensure that their procedures comply with
state securities laws, as some state regulators have found that pension
income stream products are securities under their state laws.

FINRA, the Financial Industry Regulatory Authority, is the largest
independent regulator for all securities firms doing business in the
United States. FINRA is dedicated to investor protection and market
integrity through effective and efficient regulation and complementary
compliance and technology-based services. FINRA touches virtually every
aspect of the securities business – from registering and educating all
industry participants to examining securities firms, writing rules,
enforcing those rules and the federal securities laws, and informing and
educating the investing public. In addition, FINRA provides surveillance
and other regulatory services for equities and options markets, as well
as trade reporting and other industry utilities. FINRA also administers
the largest dispute resolution forum for investors and firms. For more
information, please visit


Financial Industry Regulatory Authority (FINRA)
, 212-858-4387