FINRA Focuses On Dual Registrant Hybrid Brokers and Investment Advisors

Posted on May 24th, 2023 at 1:37 PM
FINRA Focuses On Dual Registrant Hybrid Brokers and Investment Advisors

From the desk of Jim Eccleston at Eccleston Law 

The Financial Industry Regulatory Authority (FINRA) has recently intensified its enforcement efforts to address a concerning issue related to hybrid brokers and investment advisors exploiting their dual status to maximize customer fees and commissions.

Chris Kelly, the acting head of enforcement at FINRA, highlighted that the organization is actively targeting individuals and firms engaged in the “BD-IA arbitrage” by selling a high-commission product in a brokerage account and then rapidly converting that to an advisory account with an annual fee. This is in line with FINRA's commitment to protecting investors and ensuring the integrity and transparency of the industry.

According to FINRA's industry snapshot for 2023, there has been a significant increase in the number of professionals registered both as brokers and advisors, and last year marked the first time that the number of dual registrants surpassed the number of broker-only representatives.

Earlier this year, the Securities and Exchange Commission (SEC) warned firms to be sure customers are aware of the conflicts that dual registrants face, according to AdvisorHub. In a “risk alert” issued in January, the SEC said reps needed to be clear to customers in which capacity they are serving the customer when they made a recommendation.


Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory and disciplinary matters.

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Jim, Stephany and the whole team were a God send.  We felt like we were put into a situation where we had no advocate. Jim’s team came in with a strong, well laid out strategy on how to get our story heard. Where our outside compliance company had no ability to help, our Broker Dealer was impenitent, and the regulators were aggressive pursuing vague rules, Jim came like a barricade against an assault we did not understand. Though you pay member dues to be affiliated with FINRA and a B/D, you have no voice. The only thing that is truly heard in this un-level playing field is a bulldog’s bark like Jim’s. I would encourage anyone to call Jim and his team to find a real ally in the tough and complicated world of securities regulation. They are truly the best.

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