Following on the heels of the recent Wells Fargo scandal, FINRA is performing a sweep of broker-dealer firms to determine what kinds of cross-selling programs they have been offering. The regulator is seeking an extensive list of data from broker-dealers about the incentives they offer employees to promote bank products of an affiliate or parent company to broker-dealer retail customers through referrals or direct sales. It is also looking for incentives to sell additional features, including credit cards, securities-based loans or checking accounts.
“In light of recent issues related to cross-selling, FINRA is focused on the nature and scope of broker-dealers’ cross-selling activities and whether they are adequately supervising these activities by their registered employees to protect investors,” Nancy Condon, FINRA’s vice president of media relations and web services, wrote.
FINRA wants data from broker-dealers from between January 1, 2011 through September 30, 2016 with a deadline of November 30. The fifteen categories FINRA requested include, but are not limited to:
- A description (with supporting documents) of metrics used to track and evaluate employees’ performance related to cross-selling programs, and the application of those metrics to performance ratings, promotion and termination decisions.
- A list of employees terminated or disciplined for not meeting production goals or for engaging in improper activities related to cross-selling programs.
- A list of investor complaints, litigation, arbitrations, or internal disciplinary or other actions related to cross-selling program.
The FINRA sweep follows the Wells Fargo cross-selling scandal has shaken the financial landscape. Authorities fined the bank $185 billion on September 8 for a program that led employees to open nearly 2 million new deposit and credit-card accounts without customers authorizing them. The bank also is the subject of a class-action shareholder lawsuit stemming from the scandal.
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