S(M)ocialware, E(?)-Learning, Report C/Enter, Proposed Rule 20Fuzzy

Just commenting on some miscellaneous topics. Variety is the spice of life.

S(M)ocialware: The company "Socialware" (which recently partnered with Smarsh) offers compliance tools for social media. If you are brave enough to allow your Reps to use tools like Linked In, Facebook and Twitter to expand their business, then you should check out this vendor's products. As you know, archiving and monitoring those types of communications is required, and, the fact that I am an ITiot, I can't fathom managing that compliance without some sophisticated help. I see on their website that they will be at the May FINRA conference in Baltimore. Check'em out when you're there. (PS: Here's a link to a free, interactive webcast on the topic of advisers using social media sites as business communication tools... June 2 webcast).

E?-Learning: Let me commence by stating unequivocally that the people who work in FINRA's E-Learning department are wonderful---> helpful, dedicated, pleasant. I appreciate them with my entire being. [pause] BUT: oh-em-gee. Having just gone through the process of setting up a firm's reps for participation in E-Learning in order to meet C/E firm element assignments, I have to surmise that the regulatory body formerly known as NASD did not do proper due diligence when choosing a programmer for their newly (?)improved FINRA Education online system. From start to finish, the system is crazily inefficient and cumbersome. To choose "Mandatory" for an assigned course, you can't just type the word, or choose it from a drop down menu--instead, you have to click/search/type/click/etc. before the magic word "Mandatory" appears in the box. Adding courses to a Rep's training plan is equally puzzle-like...instead of a list or drop down menu to choose from, you have to search for specific course names. I have more nit-picks but this is getting boring...take it from me, give yourself mucho time to set up Reps' training plans if you intend to use this system. And don't blame our friends at E-Learning: they really are great.

Report C/Enter:  FINRA now offers a 'continuing education regulatory element report' on Report Center. It is a quarterly report that shows how your firm's Reps perform on Reg. Element testing, compared to industry averages. You may want to incorporate this report into your C/E needs analysis process. Check it out on Report Center in Firm Gateway (you won't see a report listed if there were no Reps who took Reg. Element training in the prior quarter).

Proposed Rule 20Fuzzy: --'er, I mean, 2040. See Notice 09-69 for a description of the proposed rule, which concerns payments to unregistered persons. What everyone is always hoping for is crisp rule language on paying people like finders. For now, it's fuzzy, and according to the Notice and thoughtful comment letters, it will remain so. I suggest you read a few of the comment letters, like the one from NASAA and the one from Morgan, Lewis, to understand how this Rule, as proposed, will provide no clarity on this issue. (Wanna pay an unregistered finder? Hire a legal team to prepare an opinion of counsel that, by relying on specific regulatory guidance, no-action letters and interpretations [not rules, mind you!], justifies how your payment will not subject the recipient to SEC registration. ...G'luck with that.)

Gee, I wish I weren't so critical, cynical, analytical and generally bitch-ical. But seriously, can you blame me?? Enjoy your sunshine and your weekend--may it be varied and spicy.

SEC's Model Form Builder: What's Up Doc?

I'm so happy I started this process seven months in advance. By December, I should know how to properly customize SEC's new "model form" privacy notice (see earlier blog entries). Reminders: here is the link to the site with the links to the model forms--Form Builder Site; and here is the link to instructions for customizing the forms.

The forms are a great idea and would be very useful IF they didn't create substantial frustration when attempting to fill them in. Certain fields don't accept the information you want to include; other fields are too small to accept your chosen disclosures; lines or fields that may be omitted (according to the instructions) can't be; and, well, I generally fear that small firms not well-versed in Reg. S-P and the Fact Act will not be able to customize the form correctly. On the "Reasons" table, is the answer Yes? or No?...situations where your affiliate IA markets to your BD customers using information you shared with it will necessitate considerations like, "Is the BD subject to the Fact Act?", "Is the IA subject to the Fact Act?" and "Does the affiliate use personal information in a manner that requires an opt out?" Will micro firms know the answers? Will they even know the questions? Probably not. It's complicated stuff. And despite what the SEC thinks--that firms are supposed to be familiar with these rules (that's a paraphrase from my convo this morning)--you and I both know only the firms with the big-budget legal teams can feel good about what's in the fine print.

The form, quite simply, is not a user-friendly, prompt-driven tool for small BD's without legal departments or idle word processors. I wish it were, it would save me time, too. But instead, I just spent all day creating Word documents with input fields (big enough fields!) and comments (explaining the choices) so that I can help my clients adopt and complete the form without seriously profane outbursts (a friendly, grateful shout out to KN, whose "bite me!" did indeed fit into an SEC input field with no problem).

If anyone wants my Word forms, write me. I may accept modest remuneration for my efforts.

Oh, and perhaps you should think about using your old Privacy Notice, instead. My next research project is to understand completely what changed in Reg. S-P and how much effort it would take to simply revise my clients' existing forms. The dangling 'safe harbor' carrot presented by the Model Form may not be enough, in the end. Warn Bugs if you see him.