Header graphic for print
Securities Compliance Sentinel Analysis of cutting-edge securities industry issues

Be Careful When Using Personal Investment Advisory Questionnaires

Posted in FINRA Compliance, FINRA Enforcement

In a recent award, a FINRA panel held that the use of a personal investment advisory questionnaire as a disclosure device was misleading and had the capacity to deceive.  The panel also found that the firm’s continued approval of that use constituted inadequate supervision.  Although FINRA panels rarely disclose the reasons for their decisions, this panel specifically stated that it intended to give the Respondents the benefit of its conclusion so that the Respondents may modify their conduct accordingly.

The panel’s award could have significant repercussions for the industry.  Although not every firm uses a personal investment advisory questionnaire as a means of disclosure, the practice is not uncommon.  Questionnaires are popular among firms because they can convey information in an easy to read and understand format.  The panel did not explain how or why the questionnaire was misleading but the award could be interpreted as suggesting that all questionnaires are misleading.  Firms and advisors should immediately review their policies, procedures and questionnaires to make sure they are not using the questionnaires as a means of a disclosure.