An investigation is being launched into "cross-selling" incentive programs following a FINRA targeted examination letter to the brokerage industry.

The Securities Arbitration Law Firm of Klayman & Toskes, PA, has opened an industry-wide FINRA probe of brokerage firms into potential breaches of “cross-selling” incentive programs after contacting a number of firms.

The “targeted examination letter” is designed to review cross-selling programs” used by brokerage firms for FINRA sales practice rules and regulations. The investigation comes after regulatory actions against Wells Fargo and Morgan Stanley for “cross-selling” programs which broke rules, Klayman & Toskes said in a statement yesterday. 

“The FINRA investigation includes requests for information from member firms concerning incentives paid to brokerage firm employees to “promote bank products of the affiliate or parent company (`affiliate/parent’) to broker-dealer retail customers through referrals or direct sales,” the statement said.

The request for information covers the period of January 1, 2011, through September 30, 2016 for member firms. There is a November 30 deadline to comply with the request. 

“Our investigation focuses on whether brokerage firms violated investor rights in the pursuit of corporate profits,” Klayman & Toskes founder, Lawrence L Klayman, said.

“Investors may have sustained damages due to brokerage firms’ failure to supervise the ‘cross-selling’ activities of their employees and financial advisors, and those brokerage firms should be held responsible,” he said.

The sole purpose of this release is to determine whether Wells Fargo, Morgan Stanley, or other brokerage firms violated FINRA sales practice rules related to “cross-selling” efforts which may include unsuitable recommendations, breach of fiduciary duty, misrepresentations and omissions of material facts and a failure to supervise,” the statement concluded.