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Compliance Conference 2017

June 21-23 | Eau Palm Beach Resort and Spa

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DOL Fiduciary Rule Status

The Department of Labor (DOL) has proposed a delay in the applicability date of its Fiduciary Rule to June 9, 2017 in order to complete a review of the Rule which was ordered by President Trump.   On February 3, 2017, President Trump issued a memorandum asking the DOL to rescind...

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FINRA Rule 3120 Testing – 10 Years Later

It’s hard to believe it has been over ten years since the inception of NASD Rule 3012 (n/k/a FINRA Rule 3120).  The requirements under this rule shook broker-dealers at the core when they first were issued.  As you may recall, the Rule mandates FINRA member broker-dealers to test the effectiveness...

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Was That Wrong? Regulators Say Yes

In the Seinfeld sitcom which has been in syndication for years, Jerry’s friend, George Costanza, found himself in trouble at work for obviously inappropriate conduct. George’s response was: “Was that wrong? Should I have not done that? I tell you, I gotta plead ignorance on this thing because if anyone...

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To Save or Not to Save…A Guide for Record Retention

Spring is approaching and you may feel it is time to clean out the office, including the filing cabinets. Before you start shredding documents you will want to check the FINRA Rule 4511 and SEC books and records rules 17a-3 and 17a-4. Also, be sure to reference your Written Supervisory...

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Calculating Assets Under Management vs. Assets Under Advisement

In recent years the SEC has been paying close attention to discrepancies in Form ADV filings and regulators have specifically been spending more time reviewing assets under management. Particularly now, when Annual Updates are due, it’s important to pay close attention to how to calculate your regulatory assets under management...

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Continuing Education – Regulatory Element vs. Firm Element

FINRA Rule 1250 requires registered persons to participate in Continuing Education (“CE”).  The term “Continuing Education” should be familiar to all registered representatives; however, the distinction between “Regulatory Element” and “Firm Element” training is often blurred.  An easy way to differentiate is to remember the word “Regulatory” refers to FINRA...

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Family Office and Wealth Planning Services

Last month we discussed how a Family Office is exempt from the definition of “investment adviser” and, therefore, exempt from registration requirements. This month, we will address the type of advisory services commonly referred to as “Family Office and Wealth Planning Services” and how that differs from the exemption provided...

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What is a Family Office?

The term “family office” has multiple meanings in the securities universe.  Here we discuss the family office exemption from the definition of “investment adviser” under the Investment Advisers Act (the “Act”).  Limited regulatory oversight is one of several benefits a financial professional gets from falling within the exemption. How is...

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Make It a Priority to Read the SEC’s 2017 Examination Priorities

On January 12, 2017, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) announced its 2017 priorities. OCIE sets its priorities based upon the areas which are believed to pose the highest risk to investors. In accordance with these priorities, OCIE will focus on issues impacting investment advisers, investment companies,...

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Compliance Priorities in the New Year

As 2016 came to a close, a few investment advisers finally found time to follow up on compliance recommendations that were made months earlier. The problem, however, is that these Registered Investment Advisers (“RIAs”) were noncompliant for many months. Had a securities regulator scheduled an examination, examiners would likely have...

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Private Fund Marketing and Broker Dealer Registration

The Securities and Exchange Commission (“SEC”) has disciplined firms and individuals for broker-dealer registration issues for private fund marketing activities and more recently in June 2016 the SEC took enforcement actions against Blackstreet Capital Management.[1] [2] [3] We would expect the regulatory focus to continue in light of general solicitation and general...

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Holiday Gift Giving and Receiving – Is it Compliant?

Ho Ho Ho…Tis the season. It’s that time of year again – the holiday season is officially upon us. This time of year always brings such excitement; the turkey and cookies, family and friends, ugly sweater parties, and of course the spirit of giving. With all this excitement, the last...

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Using the Magic 8 Ball to Predict the Regulatory Future

The Magic 8 Ball is a toy that was first enjoyed by children in the 1950s. The toy gave standard answers to important questions such as “Will I pass my spelling test?” Instead of studying, students relied on answers like “Signs point to yes.” After a surprising election, we’re left...

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Wrap Fee Programs

On September 8th the Securities and Exchange Commission (SEC) announced that two investment advisory firms had agreed to pay penalties in the amounts of $600,000 and $250,000 and commit to certain disclosure and compliance undertakings for failing to have established policies and procedures designed to determine the amount of commissions their clients were being charged when wrap fee program sub-advisers “traded away”.

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RIAs Must Keep All Performance-Related Communications and Not Just Advertisements

On August 25, 2016, Registered Investment Advisers (“RIAs”) received the news that the SEC adopted amendments intended to enhance the reporting and disclosure of information provided by them to investors and the Commission. The SEC also amended the Books and Records Rule as it relates to performance-related communications. Beginning on October 1, 2017, RIAs will be required to retain communications dealing with performance or rate of return for all managed accounts or securities recommendations. RIAs must also keep records demonstrating how they calculated the performance referred to in those communications.

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Suitable Sanctions Await Advisers Recommending Unsuitable Investments

In their 2016 examination priorities letters, the SEC and FINRA stressed that suitability will be a major focus during examinations. State securities examiners are also on the lookout for situations where Registered Investment Advisers (“RIAs”) fail to recommend suitable investments. The North American Securities Administrators Association (“NASAA”) reported that one of the top books and records violations found by state examiners was a failure to document suitability.

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Branching Out – Office Registration

I’ll bet you’ve been to Wal-Mart many times and most likely to more than one location. The retail giant started as a small business with one location and is now a house hold name with locations all over the world. This was not an overnight achievement but a long industrious process.

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Financial Exploitation and Abuse of the Elderly and Other Vulnerable Clients

Financial abuse is the theft or mismanagement of a person’s funds, real estate, investments, or personal property. Anyone can be a victim of financial abuse, but particular groups may be especially at risk. Age and specific disabilities may have an impact on the individual’s capacity to make decisions which places them at increased risk of abuse. People with learning disabilities or other conditions that have led to cognitive impairment, and in some instances, people who have poor mental health may also be particularly at risk. The elderly, however, are probably the largest group of vulnerable clients and their numbers are expected to increase as the population ages. Like all abusers, financial elder abusers perceive the elderly as vulnerable and unlikely to fight back or expose the abuse. Financial abuse can be a one-time incident or it can continue for many years.

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SEC Proposes New Rule Mandating Business Continuity and Transition Plans

On June 28, 2016, the SEC proposed a new rule which will require Registered Investment Advisers (“RIAs”) to adopt and implement written business continuity and transition plans. The purpose of proposed Rule 206(4)-4 is to ensure that RIAs have plans in place that are designed to minimize the damage if there are disruptions to a firm’s operations. Comments on the proposed rule will be permitted for sixty days after its publication in the Federal Register.

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Solicit Compliance Advice Before Using Solicitors

Delray Beach, Fl – May 2016 – As Registered Investment Advisers (“RIAs”) attempt to grow their business, they often consider whether to use solicitors. RIAs should be aware of the compliance obligations they will face if they choose to use solicitors. These compliance requirements are dependent upon where the RIA...

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Conflicts of Interest and Outside Business Activities

In recent years, conflicts of interest have been a hot topic for regulators. Not only are actual conflicts of interest troubling, but the perception of a conflict of interest can be just as concerning. Typically, these are situations in which personal interests conflict with professional interests and an advisor’s fiduciary responsibilities.

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Can you be Compliant without Culture?

By Stephen Murphy, VP BD Services In Sergio Leone’s classic spaghetti western, “The Good, the Bad, and the Ugly,” one is left guessing exactly which character deserves each moniker and which character(s) we may, perhaps unfortunately, resemble. Sergio Leone spells it out for us in the final scene. It appears...

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Compliance Resolutions for the New Year

Since it’s the New Year, now is the perfect time for Chief Compliance Officers (“CCOs”), principals, and senior management to make resolutions to keep their firms compliant. The consequences of noncompliance can ruin anyone’s year.

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Equity Crowdfunding – The Time Has Come

Since the passage of the Dodd-Frank Act, it seems everyone has been talking about Title III and equity crowdfunding. Well, the time may have finally come with the publishing of the SEC rules in the Federal Register in November. But wait…there could be more delays.

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CCO Liability – Are you a CCO or Supervisor?

CCO liability has become a hot topic both for broker-dealers and investment advisors as we have seen a number of high profile cases brought against CCOs over the past few years. Many CCO have read the statements from various SEC commissions on this topic as well as heard it discussed at conferences put on by both the regulators and industry organizations.

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Cybersecurity for the insecure RIA

Investment advisers have a great many reasons to feel anxious and not just because of the stock market’s volatility. Registered investment advisers and investment adviser representatives face the risk of cyber attacks against their firms and their clients. If those risks weren’t enough to cause advisers to be insecure, they also must be concerned that securities regulators will criticize their efforts to address cyber threats.

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Restructuring Qualification Examinations

FINRA has proposed restructuring its qualification examination process to create a generalized Securities Industry Essentials Examination (SIE) and a specialized knowledge examination specific to a registration category or job function.

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2016 Renewal Program

Presented by: Kathryn Langridge, Senior Broker Dealer Consultant and Gail Musco, Supervisor, CRD Services For a general overview of year-end compliance reminders and compliance checklists for broker-dealer and investment adviser firms, please register for our webinar. http://regulatorycompliance.com/webinars/ As the end of year approaches, many Chief Compliance Officers find themselves wondering if they have...

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The New Age of Regulatory Element Training

Way back in the beginning of time when the continuing education rules were new and the old-time representatives were grandfathered, none of us would have ever imagined that FINRA would do away with the grandfathering and subject all registered representatives to trudging into a testing center every three years to do a training module.

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A Research Report on Research Reports

Quiet periods, information barriers, retaliation, supervision…what is the common denominator for these terms? Answer: FINRA Rule 2241. If you don’t recognize that rule – then look to NASD Rule 2711 and Incorporated NYSE Rule 472 which pertained to member firms’ equity research reports and activities.

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