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Finra to Urge BD Firms to Use Innovative Design Techniques for Disclosures

By Rita Raagas De Ramos May 17, 2019

Finra is preparing to issue a regulatory notice about how broker-dealer firms can use innovative approaches to make disclosures more understandable, according to Thomas Pappas, director of the self-regulator’s advertising regulation department.

“This is not about what you can’t do, but what you can do,” Pappas said Thursday at Finra’s annual conference in Washington D.C.

The notice, which is “close to publication,” will urge member firms to use design techniques, including those that “dig deeper” with the use of interactive tools and pop-up messages, for example, according to Pappas.

Using visually appealing design is also being suggested for a key disclosure form that’s part of the SEC’s proposed Regulation Best Interest package.

That disclosure form – the Customer Relationship Summary – is supposed to clearly state to clients if they are dealing with a broker-dealer or an advisor. It’s aimed at clearing up any confusion investors may have about their relationship with their financial professionals, exactly what kind of standard of service they can expect from them and how these professionals are getting paid.

The CRS form – set at a maximum of four pages in length – requires an explanation of the principal types of services offered; the legal standards of conduct that apply to the investment advisor or the broker-dealer (whichever relationship applies); the fees a client might pay; and certain conflicts of interest that may exist.

Susan Kleimann, founder and president of Kleimann Communication Group, previously said she’s bothered that the CRS form contains a set of 10 questions on the last page that investors are encouraged to ask their financial professionals — yet the CRS form is not organized around those questions.

Her firm analyzes communication products – such as documents and websites as well as disclosures for federal agencies – and offers perspectives on how consumers will respond to them.

Kleimann said most humans have an attention span of nine seconds and would get turned off by a document that seems hard to read.


The CRS form should be plain but meaningful, building on context and with thoughtful design, Kleimann said. “Design is critically important,” she said.

Finra president and CEO Robert Cook said previously that Finra will have exam oversight on the requirements in the SEC’s Regulation Best Interest package that are relevant to broker-dealers.