I have reason to believe that certain individuals in my firm are violating certain FINRA rules. How do I go about alerting the regulatory authorities?

-D.P., New York

FINRA has recently created the Office of the Whistleblower. This is a dedicated team formed to expedite the review of high-risk tips by FINRA senior staff. And it ensures a rapid response for tips that are believed to have merit. Through the Office of the Whistleblower, individuals with evidence or material information about potentially illegal or unethical activity can reach senior staff, who can quickly assess the level of risk involved and make sure that each tip is properly evaluated.

Those tips warranting additional review and investigation will be subject to an expedited regulatory response. FINRA will refer any whistleblower tips that fall outside its jurisdictional reach to the appropriate regulatory or law enforcement agencies. FINRA's whistleblower initiative does not replace longstanding processes for handling thousands of routine regulatory tips and customer complaints each year. To submit a tip, you can send an e-mail to: whistleblower@finra.org or call 1-866-96-FINRA (1-866-963-4672).

Another rep in my office was recently sued (along with the company) for selling a structured product to a customer. The firm lost the arbitration. From what I'm told, it sounded like the arbitrators thought he failed to disclose everything about the investment. I've heard this rep discuss products with his clients, in great detail, what these products are and how they work. I thought both he and I did our jobs in disclosing the risks to our clients, but now I'm worried that some of my clients might sue me as well. How much more detailed can we be when discussing structured products with seemingly intelligent clients?

-B.T., via email

While it's impossible to correctly guess what an arbitration panel will do, generally speaking the more disclosures you provide to clients, the better off you'll be. And it is important that you try and maintain documentation showing that you explained to the client exactly what the product is and how it works. FINRA has noted that: "In promoting the advantages of structured products, such as the interest rate offered and the creditworthiness of the issuer, it is necessary that members balance their promotional materials with disclosures concerning the attendant risks, which may include loss of principal and the possibility that at expiration the investor will own the reference asset at a depressed price." According to FINRA, if the sales material does not adequately describe the exact nature of the product, for example, by representing it as an ordinary debt instrument, it will likely be found to be in violation of Rule 2110. As with any other investment product, the sales literature and presentations must provide a balanced picture of the risks and not mislead an investor. As FINRA notes: "Providing risk disclosure in a prospectus supplement does not cure otherwise deficient disclosure in sales material, even if such sales material is accompanied or preceded by the prospectus supplement." One area of particular concern regarding structured products is the credit ratings assigned to them by national rating organizations.

When the credit rating reflects the creditworthiness of the issuer rather than a rating of the market risk associated with the product (or the reference security), FINRA has said that the firm must be careful to spell out the difference. According to FINRA, presentations of a credit rating for a structured product suggesting that it relates to the safety of the principal invested, or the potential returns, will be viewed as misleading. In other words, the firms must make sure that as it relates to the credit rating for a structured product, the sales material makes it clear that the rating is not an indicator of the performance of the investment but, rather, simply an indicator of the issuer's ability to meet its obligations.

I paid a company for some marketing material and brochures with my name on it. My compliance officer says I can't use them because it looks like I wrote them and that violates some FINRA rule. What rule is involved here and can I use this material?

-W.J., Georgia

FINRA Notice to Members 08-27 discusses the prohibitions against so-called "ghostwritten" material. Some vendors prepare and sell publications for use by registered representatives that allow the purchaser to affix his name or otherwise imply that the purchaser is the author. FINRA has noted that these types of publications could violate a number of rules, including NASD Rules 2110, 2120 and 2210 and Incorporated NYSE Rule 472.1.