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.