SEC Warns Financial Advisory Firms Regarding Conflicts of Interest Tied to Compensation

Posted on August 16th, 2022 at 2:37 PM
SEC Warns Financial Advisory Firms Regarding Conflicts of Interest Tied to Compensation

From the Desk of Jim Eccleston at Eccleston Law.

The Securities and Exchange Commission (SEC) has sent a warning to financial advisory firms that they must go above and beyond solely disclosing conflicts of interest related to employee pay programs in order to avoid regulatory scrutiny.

According to a recent SEC staff bulletin, the SEC is seeking to dissuade firms from taking a “check-the-box” approach to achieve compliance as advisors are being held responsible for identifying, disclosing and potentially eliminating conflicts of interest. The SEC additionally noted that financial advisory firms should closely monitor conflicts of interest that may develop from employee compensation because pay incentives may motivate an advisor to put their own interests ahead of their clients.

According to the SEC bulletin, firms also ought to avoid “compensation thresholds” that disproportionately increase pay via “incremental increases in sales of certain products or provision of certain services.” The bulletin additionally instructed firms to monitor sales and recommendations provided to clients when advisors are approaching thresholds for firm recognition.

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

Tags: eccleston, eccleston law, advisors, sec

Return to Archive

TESTIMONIALS

Previous
Next

I cannot thank you enough for your guidance. It's a good feeling knowing someone is fighting for you.

Matt J.

LATEST NEWS AND ARTICLES

September 5, 2025
Merrill Lynch Advisor Faces FINRA Disciplinary Action for Refusing to Cooperate with Investigation

The Financial Industry Regulatory Authority (FINRA) has initiated disciplinary proceedings against former Merrill Lynch broker Ali F. Chehab of Portland, Oregon. According to ThinkAdvisor, FINRA alleges that he refused to cooperate in an investigation into potential misconduct, including unauthorized trading and material misrepresentati...

September 4, 2025
Wells Fargo Ties $2,000 Bonus to Non-Solicitation Clause, Raising Advisor Concerns

Wells Fargo & Co. recently issued a $2,000 bank-wide award to its 215,000 employees, following the Federal Reserve’s June decision to lift its asset growth restrictions.

September 3, 2025
Kansas City Advisory Firms Agree to $25.5 Million Settlement Over No-Poach Allegations

Mariner Wealth Advisors, along with two other Kansas City-area firms, has agreed to a $25.5 million class action settlement over allegations that they illegally agreed not to solicit each other’s advisors.