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FINRA has issued an investor alert involving high-yield CD offers that are really bait for the sale of a high commission investment. Apparently, FINRA has received calls on its senior hotline making it aware of a sales practice that involves enticing a client in to the office to purchase a CD and then being sold a high commission product like a fixed or equity-indexed annuity.
You might ask, so what? Think of it this way. If FINRA is issuing an investor alert regarding what it thinks is a shady practice, you should be concerned. In other words, you have to anticipate that enforcement cases are on the horizon where FINRA finds these sales practices.
This alert should be a message for anyone who sells CDs and/or high commission annuity products that FINRA may be looking at your sales practices in the future. There is nothing wrong with selling these investments as long as they are suitable for the client and there is full disclosure.
If you sell these products, it may make sense to test your salespeople to see if they are using CDs as a bait scheme. Weeding out bad apples should always be part of your supervision and compliance programs. It is better that you learn of the problem and stop it before your regulator does it for you.
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