Few Reminders: Outside Brokerage Accounts and Cycle Exams

Happy almost-end-of-February. Wasn't that lunar eclipse the coolest--'er, as the youth say, sick?! The shrouded moon should be a reminder to BD firms of the long shadow cast by FINRA. And thus...

A few reminders: your RR's MUST tell you about their 'outside brokerage accounts,' that is, their accounts at other firms in which they can buy/sell securities (futures, too). And they have to dislcose any such accounts in which they have a beneficial interest...like their kids' or spouse's accounts. Besides this notification requirement, the outside brokerage firms must be notified that the RR is registered with your firm. Usually this is done at account opening, right on the application, but if the account is existing when the Rep joins your firm, the outside brokerage firm may not be advised.... so when your Rep notifies you, send a notification letter to the outside brokerage firm. Oh, and if your firm doesn't allow Reps to maintain accounts at other firms, and a Rep defies this prohibition, well, talk to Bill Singer about that one. FINRA is coming down hard on Reps for this defiance. (Bill's "Cases of Note" on his RRBDLAW.com website is a valuable means of learning about violations and penalties.) Compliance tip: ask your reps at least once a year if they have opened any new accounts and take it from there.

Second thought for the day: FINRA's cycle exams may not be as far apart as you'd thought, based on your recent 4-year experience. They're using a risk-based system to test and may conduct a review of, say, financial books and records every 2 years, and a sales practice exam every 4 years. The unfortunate thing is, they won't tell you what cycle you're on. And the cycle may change without warning based on prior exam findings or things like errors on FOCUS filings. So don't get too comfortable or lazy: stay in compliance 24/7 and you'll be okay...oh, and a call to your liaison to ask about your exam cycle may shed some light on the subject. Or maybe a shadow--let's hope not.

Link to Sources for Going Paperless

Investment News delivers stories and information useful to investment advisors. They started a newsletter about technologoy developments called IN: Tech and Davis Janowski posted an article on February 19 about going paperless. The article references vendors providing applications and other solutions that may be of interest to you, the broker-dealer struggling to keep up with record keeping demands.

I got pemission to provide the link to the article... go to: A Paperless Office Can Boost Your ROI and see what you think.

Remember to read my other entries on electronic record keeping if you want to test your ability to see cross-eyed. :)

See Jan. 22 Post on ESM: Audit System

Hi. I'm still new at this blogging thing. I posted a new entry today--February 12, 2008--but it showed up as posted on Jan. 22. That's when I started writing it and saved it as a 'draft.' Please see that entry, below, for a tedious but possibly interesting discussion of a requirement under the SEC electronic storage rules you may not know about.

Thanks.

Protecting Infants

FINRA has deluged us recently with guidance and reminders about protecting seniors: let's not limit our focus to the elderly. You've all seen that commercial featuring a baby making stock trades: it's time to think about how your firm will protect these valuable--and vulnerable--customers from potential deception by registered representatives. Next time a baby calls your firm to set up an account, ask these important questions in order to determine suitability:
Can you talk yet?
Can you walk yet?
Do you have a state- or federally-issued document verifying your identity?

That should be enough to get the ball rolling. And don't forget to discuss investment preferences. Formula and plastic rattles are not all these savvy little guys care about...

(In jest. Couldn't help it.)