By Suzanne Barlyn

(Reuters) - Wall Street brokers must keep their clients in the loop about bonuses they receive when the brokers switch firms, under a preliminary measure approved by the Financial Industry Regulatory Authority's board on Thursday.

The board has authorized FINRA to send the proposal to the U.S. Securities and Exchange Commission, which must review and approve all changes to FINRA's rules.

Disclosing a hefty bonus would inform investors of a conflict of interest their brokers may have when they ask clients to switch firms along with them, according to Richard Ketchum, FINRA's chief executive.

FINRA is Wall Street's industry-funded watchdog.

Switching firms could be costly to investors, who may have to sell certain securities, such as brokerage-branded mutual funds, that are not available through their broker's new firm, he has said.

"This proposal is about making sure the customer can make a fully informed decision to follow a broker to a new firm and understand the costs associated with transferring his or her account," Ketchum said in a statement.

The disclosure requirement would apply to recruitment compensation - including signing bonuses - of $100,000 or more, and to future payments contingent on performance criteria. The proposal does not require disclosing precise dollar amounts of compensation, but rather the ranges in which the compensation falls.

The first range would be $100,000 to $500,000, followed by $500,000 to $1 million and even larger ranges.

Firms would also be required to report to FINRA significant increases in total compensation paid to newly recruited brokers during their first year. FINRA will use information in industry-wide examinations to look for certain sales abuses that may be motivated by a broker's compensation increase.

The trigger for reporting would be an expected increase of 25 percent or $100,000 over the prior year's compensation, whichever is greater.

While the largest brokerage firms supported such a plan, it has been controversial because some firms and brokers are reluctant to make those disclosures and fear it would ultimately limit compensation.

Such a rule, however, would shed more light on the brokerage recruiting world, where signing bonuses for top brokers have become outsized, with top firms offering as much as 160 percent to around 195 percent of a broker's annual trailing revenue production upfront for making a move.

That would mean a broker generating $1 million in annual revenue could receive nearly $2 million on day one, with additional promised compensation for meeting certain targets down the road, according to industry lawyers and recruiters.

The proposal "feels a bit heavy-handed," said Jeff Bischoff, a brokerage recruiter in Old Greenwich, Connecticut. "Good, prudent advisers move firms when they no longer feel their current firm is providing them with the support and brand ... to service and grow their businesses."

Other recruiters, however, say brokers should not feel they have something to hide. Lucrative bonuses, they say, show clients that their broker is desirable.

FINRA must seek permission from its board of governors for sending rule proposals to the SEC for review and final approval.

(Additional reporting by Ashley Lau in New York; editing by Matthew Lewis)