FINRA eyes IRA withdrawal abuses

Intensifying its recent focus on protecting retirees, FINRA of Washington last month began a sweep of broker-dealers that focuses on clients’ retirement accounts and the use of a section of the tax code allowing them to withdraw money before turning 59-1/2 years old.
Abuse of this part of the tax code, known as Section 72(t), has been the subject of several regulatory actions over the past year, industry attorneys noted.
At least 10 firms – and potentially more – are subject to the sweep, which is coming from FINRA’s main offices in Washington as well as district offices in New York, Denver and New Orleans, said Brian Rubin, a partner in the Washington firm of Sutherland Asbill & Brennan LLP and former attorney with NASD, the predecessor of FINRA.
Wirehouses, smaller firms and independent-contractor broker-dealers are included in the sweep, Mr. Rubin said.
In the sweep letter, part of FINRA’s request for information focuses on “all seminars and/or other events directed at potential or early retirees, including prospects that are under age 59-and-a-half years old.”
FINRA’s previous actions on this issue included Citigroup Global Market Inc.’s agreement in June to pay over $15 million in fines and restitution for failing to supervise a team of brokers based in Charlotte, N.C., for using misleading sales materials in dozens of meetings with employees of BellSouth Corp.