May 7, 2008
Thank you for providing the opportunity to provide comment on File #s7-06-08 – Part 248 of Reg S-P (pages 40-47 are attached)
The regulation as it stands would have a substantially negative impact on the brokerage business conducted within large and small Financial Institutions (Banks and Credit Unions) across the nation.
Please consider the difference between the types of brokerage firm models that exist:
1) Independent B/D: It is acknowledged the Advisor “owns” the client relationships. Transferring client data from one independent B/D to another should be easy with little impact to the client, as the client would not have a relationship with the B/D, but rather with the Advisor (i.e. Linsco Private Ledger LPL, Raymond James, etc.). Typically, the Advisor is responsible for all of their expenses as they “build their book of business”.
2) Wirehouse B/D: The relationships are typically the same as above. This would include the initial signatories referenced in the 2004 protocol (i.e. Merrill Lynch, Smith Barney, etc.). Typically, the Advisor is responsible for all or a portion of their expenses as they “build their book of business”.
3) Financial Institution B/D: The Advisor/Client relationships in Banks and Credit Unions are completely different (i.e. Chase, Wells Fargo, BofA). The Advisors are given full access and support to help the Financial Institution build a book of business for the Enterprise. The Advisor typically has little or no out of pocket expenses and in most cases are actual employees of the institution. The Advisors acknowledge when they take the position that the clients and all related information are the property of the financial institution. The Financial Institutions bare great expense in developing “their book of business” as it relates to salaries, bonuses, marketing, hardware, software and licensing for the Advisor. It would not be fair ethically or contractually to allow the Advisors to work for a financial institution for 5 years and then transfer the financial institution’s book of business to another firm.
The difference in models is significant and the negative impact to financial institutions across the country would be substantial, if they are not excluded from this Reg.
Please feel free to contact me if you have any questions or if I can be of further assistance. Sincerely, Mike Prior
Michael T. Prior
Credit Union Financial Network (CUFN)