Finding A Way.

State Securities Regulators Outline the Good, the Bad, and the Ugly

Investment fund attorney NYCUsing the data collected in their examinations of broker-dealers, the North American Securities Administrators Association (NASAA) recently identified the most common compliance violations.

State securities regulators conducted a total of 236 examinations between January 1 and June 30, 2012, and identified 453 types of violations in five compliance areas. The greatest frequency of violations involved books and records, followed by supervision, sales practices, registration & licensing, and operations.

Based on the findings, NASAA recommended 10 best practices to boost compliance:

  • Suitability. BDs must develop effective standards and criteria for determining suitability. State regulations and FINRA Rules 2090 and 2111 require registered persons to “know your customer” and receive training sufficient to demonstrate knowledge of products pre-sale.
  • Develop, Update, and Enforce Written Supervisory Procedures. BDs also should ensure that staffing and expertise are commensurate with the size of the BD, type(s) of business engaged in by the firm, and the individual responsible for specific procedures.
  • Advertisements. Advertisements and sales literature must be fair and balanced and must be approved by the BD and/or FINRA. Seminar notices/advertisements, programs, seminar materials utilized, and guest speakers must be approved by the BD.
  • Correspondence. Correspondence, both electronic and hard copy, must be effectively monitored. This includes a system of capturing and maintaining electronic, business-related correspondence sent by salespersons from websites and social network service providers outside the firm.
  • Branch Office Audits. BDs must develop a branch audit program that includes a meaningful audit document/plan, unannounced visits, a means to convey audit results, and a follow-up plan requiring that the branch take corrective action.

Eckerle Law offers a highest-quality and cost-effective alternative to the traditional law firm model for a wide variety of transactional and regulatory matters serving all your business law needs. Our experienced attorneys also provide a full range of compliance services for investment advisers, offering compliance tools that are tailored to fit the ever changing regulatory landscape as well as your business needs.

If your company would like to strengthen its business practices, please contact us today so we can leverage our experience to create real-life business and legal solutions to help your business thrive.