Regulatory Alerts2018-10-05
Added · Updated
Guidelines on Switching of Designated Investment Products [FAA-G10]
Licensed and exempt financial advisers must ensure representatives do not recommend switching from an original designated investment product to a replacement product in a manner detrimental to the client. Advisers are required to disclose all associated fees, charges, and potential disadvantages in writing, including a prominent warning regarding transaction costs and suitability. Front-end monitoring procedures mandate written client declarations regarding advice received and supervisor review of recommendations, while back-end controls require tracking switch volumes and detecting undeclared switches. Additionally, remuneration structures based solely on sales volume are discouraged to prevent undesirable switching practices.
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