We’d like to share a quick reminder to help support you and your clients.
We’ve observed instances where the statement for the account being liquidated to fund a new account was not included, thoroughly reviewed, or properly documented in the Source of Funds section of the transaction disclosure. Providing a statement for the account or product being liquidated is essential to ensure a complete understanding of the client’s current holdings and how they align with their goals and objectives.
FINRA Rule 2111 requires recommendations to be based on a reasonable understanding of the client’s investment profile. A current statement provides key details such as:
- Share Class – Listed next to fund name (e.g., A, C, I, R6); indicates fee structure.
- Sales or Surrender Charges – Found under redemption or surrender sections. When an annuity contract is up for renewal or comes out of surrender, it can often be ascertained by looking at the inception date of the contract typically found on page 1 of an annuity statement.
- Contribution Sources (Qualified Plans) – Identify pre-tax, Roth, after-tax, employer match.
- Vesting Status – Located in plan summary; confirms employer contribution ownership.
- Outstanding Loans – Listed separately within qualified plan details.
- Account Registration – Shown in account title; impacts tax treatment and eligibility.
Our Shared Goal
Please obtain and carefully review a current, complete source-of-funds statement before submission. This helps:
- Ensure recommendations are in the client’s best interest
- Reduce follow-up and review delays
- Protect both your client and you
If details on the statement are missing or unclear, you should call the vendor for verification. Once that is complete, ESI is happy to help. We’re on the same team and share the goal of delivering strong, well-documented client recommendations.
The Direct Business Suitability team can be reached at 800-344-7437, option 2,5,2.
Alternatively, you can email the team for a preview by sending an email with the work item details to ESIDBPreview@nationallife.com.