For Broker-Dealer Use Only. Annual Compliance Meeting 2013.
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Transcript of For Broker-Dealer Use Only. Annual Compliance Meeting 2013.
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For Broker-Dealer Use Only.
Annual Compliance Meeting2013
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Compliance
How do you view your Compliance Department?
A.Business PartnerB.AdversaryC.Pain in the ButtD.Both B and C
For Broker-Dealer Use Only.
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For Broker-Dealer Use Only.
Book Quote
The Social Media Handbook for Financial AdvisorsPublished 7/31/2012
Page 3: “To this day, it’s still hard for me to not see a compliance officer as the enemy…”
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Compliance
Take a preventative approach with your business
Use Compliance:• Before purchasing marketing programs• Before clients sign sale paperwork• Before spending time writing newsletters
For Broker-Dealer Use Only.
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For Broker-Dealer Use Only.
Compliance 2001
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For Broker-Dealer Use Only.
Compliance 2013
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For Broker-Dealer Use Only.
Regulatory Oversight
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For Broker-Dealer Use Only.
Regulatory Oversight
SEC
•New exam schedule: “We simply show up”•Enforcement actions up 92% from 2009—2011 •734 enforcement actions in 2012, $3b in penalties and disgorgement
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For Broker-Dealer Use Only.
Regulatory Oversight
FINRA
• $68,000,000 in fines 2012• Record $34,000,000 in restitution to customers• 800 branch office examinations in 2012• 5,100 internal examinations of broker/dealers and reps
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For Broker-Dealer Use Only.
Regulatory Oversight
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For Broker-Dealer Use Only.
Regulatory Oversight
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For Broker-Dealer Use Only.
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For Broker-Dealer Use Only.
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For Broker-Dealer Use Only.
Regulatory Oversight
States
• More States are active in on-site branch examinations
• Increased regulations regarding product sales (alternative investments)
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For Broker-Dealer Use Only.
Current FINRA Priorities
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Current FINRA Priorities
• Variable Annuities (suitability/recommendations, buy-back programs, rep product knowledge)
• Structured Products
• Non-Traded REITs
• Regulation D Offerings
For Broker-Dealer Use Only.
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Current FINRA Priorities
Cyber-Security and Data Integrity
• Antivirus software on all machines• Password protection on all machines• Wi-fi password on network• Wire/distribution requests via email
For Broker-Dealer Use Only.
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Current FINRA Priorities
Electronic Communication
Prohibited for business use. Examples:– Facebook – Twitter– MySpace – YouTube– Chat Rooms – Interactive Blogs– Cell phone text messaging– Instant messaging– Outside email
For Broker-Dealer Use Only.
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For Broker-Dealer Use Only.
Customer Complaints
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Client Expectations
• Do your clients expect 12% + per year? Risk?
• Clients understand risk until they lose a penny.
• Clients can handle volatility as long as their accounts go up in value.
For Broker-Dealer Use Only.
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For Broker-Dealer Use Only.
Customer Complaints
Immediately notify Compliance of any client complaint
Never attempt to settle complaints on your own!
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For Broker-Dealer Use Only.
Best Practices
• Take notes during client meetings
• Mail meeting notes to clients
• Get family members involved
• Fully explain both the pros and cons of the investment
• Have clients complete & initial paperwork
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Best Practices
Talk to your clients!
For Broker-Dealer Use Only.
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For Broker-Dealer Use Only.
Top 10 Ways To Get Fired From Sigma
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For broker/dealer use only. B/D OPS 2006
10. Improper Signatures
• Assistants signing rep name
• Using signature stamps
• Signing clients’ names/initials
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For broker/dealer use only. B/D OPS 2006
9. Mishandled Funds
Reps May Not:
• Accept cash • Endorse checks made payable to you/your
business• Hold customer checks longer than 1 business day
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For broker/dealer use only. B/D OPS 2006
8. Selling Away
• Selling securities not approved by your broker/dealer.
• Beware of the “non-security”
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For broker/dealer use only. B/D OPS 2006
7. Settle Client Complaints
• Reps cannot settle disputes directly with clients
• Get compliance involved immediately
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For broker/dealer use only. B/D OPS 2006
6. Paying Referral Fees
• Reps cannot compensate non-registered persons for securities transactions
• A series 7 rep may not pay commissions to a series 6 rep for sales which required a series 7
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For broker/dealer use only. B/D OPS 2006
5. Sales Violations
• All direct business sales must be approved by the home office prior to submitting to the product company
• Sending the home office copies of sales is not sufficient
• Sales which are ‘rejected’ by the broker/dealer may not be submitted to the product company
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For broker/dealer use only. B/D OPS 2006
4. Failure to Report OBAs
All outside business activities must be approved prior to engaging in them (Outside Business Activity form may be completed/submitted from our website)
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For broker/dealer use only. B/D OPS 2006
3. Advertising Issues
• All advertisements, sales literature, and seminars must be approved prior to use
• Changes noted by compliance must be made
• Approvals are valid for one year
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For broker/dealer use only. B/D OPS 2006
2. Failure to Update Form U-4
U-4 must be immediately updated to reflect such items as:
• Change of address, phone, website, DBA, etc
• Felony• Bankruptcy• Liens• Outside business activity
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For broker/dealer use only. B/D OPS 2006
1. Take Shortcuts With Forms
The following items are NOT allowable:
• Having clients sign blank forms
• Changing client forms (dates, dollar amounts, etc)
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For Broker-Dealer Use Only.
Updating the Form U-4
Matthew Campbell (CRD #1879717, Registered Representative, Valparaiso, Nebraska)
Barred from the industry
Willfully failed to disclose material information on his Form U-4.
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For Broker-Dealer Use Only.
Client Signatures
Gary Martin (CRD #729331, Registered Representative, Indianapolis, Indiana)
Barred from the industry
Signed a customer’s name to a distribution form to facilitate a required minimum distribution (RMD) from an IRA account.
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For Broker-Dealer Use Only.
Email Usage
Dorian K. Saunders (CRD #4577155, Registered Representative, St. Louis, Missouri)
Barred from the industry
Sent public customers electronic mail from a personal email account, and instructed the customers not to send him emails at his member firm’s email address
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For Broker-Dealer Use Only.
Borrowing/Lending to Clients
Samuel Mugavero, Jr. (CRD #2189945, Registered Representative, Bethlehem, PA)
Barred from the industry
Borrowed $10,000 from a non-family customer in contravention of the firm’s written procedures
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For Broker-Dealer Use Only.
Using Discretion
Roger C. Faubel (CRD #1233851, Registered Principal, Canfield, Ohio)
Fined $5,000/Suspended for 10 days
Purchased $25,000 worth of mutual funds in a customer’s account without the customer’s prior authorization
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For Broker-Dealer Use Only.
Disclosing Outside Business
Dennis Brown (CRD #3022551, Registered Representative, Springfield, MA)
Barred from the industry
Engaged in outside business activities without providing written notice to his member firm.
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For Broker-Dealer Use Only.
Falsifying Documents
Angela Bounds (CRD #4460214, Registered Representative, Purvis, Mississippi)
Fined $10,000/Suspended for 6 months
Falsely represented that annuity purchases were not being funded with money from surrendered annuity contracts.
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For Broker-Dealer Use Only.
Outside Brokerage Accounts
Jeff Ng (Registered Representative, Stamford, CT)
Fined $25,000/Suspended for 2 years
Failed to disclose all outside brokerage accounts to his broker/dealer
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For Broker-Dealer Use Only.
Additional Items
• Maintain your blotters (paper, MasterTrack, Investigo)
• Keep all required Compliance files up-to-date
• Update Client Data Sheets at least every 2 years
• Ensure you are licensed in each state in which you transact business
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For Broker-Dealer Use Only.
Thank you
Questions?