Regulatory Compliance E-newsletter - May2013
Posted On 5/29/2013 3:00:00 PM
Feature of the Month
Key Takeaways from the NRS Spring 2013 Compliance Conference
The NRS 28th Annual Spring Compliance Conference proved to be what participants expected: A beautiful setting with engaging sessions that enabled compliance professionals to:
- Confirm and expand the content and direction of their compliance programs
- Re-assess compliance roles in firms of all sizes
- Enhance the compliance function with new perspectives
We’d like to share some of the conference highlights:
- Carlo di Florio (SEC OCIE Director): SEC interest in Enterprise Risk Management (ERM) is not limited to large firms. Even small firms should “leverage segregation of responsibilities” in developing ERM.
- Dan Sibears (FINRA EVP/Member Regulation Programs): Outlined the reasons why an SRO would be appropriate for investment advisers, while Commissioner Heath Abshure of the Arkansas Securities Department listed several reasons why NASAA opposes an SRO for advisers.
- Dan Sibears and Heath Abshure both pointed to the Consumer Financial Protection Board’s (CFPB) April 18 report “Senior Designations for Financial Advisers” as being an important study that will be important as senior issues continue to be a focus area for regulators.
- Lee Falk (I. Lee Falk, Esq.) and George Sepsakos (Associate, Groom Law Firm) ERISA speakers made the following points:
- The DOL is likely to take the next step in finalizing an expanded ERISA definition of “fiduciary” this Fall or Winter.
- ERISA fiduciary status applies not only to person hired by the plan sponsor, but also to persons hired by participants to provide advice on plan assets.
- A prohibited transaction may occur if an ERISA fiduciary manages a rollover IRA for a plan participant if the ERISA fiduciary recommended the use of the fiduciary’s firm to the participant.
- George Sepsakos (Associate, Groom Law Firm) reviewed the key points in a March 2013 report by the US General Accountability Office on its concerns with the process by which direct contribution plan participants roll over their plan assets to other plans or IRAs. The GAO recommended that the DOL:
- Seek additional statutory authority if necessary to regulate rollover sales disclosures
- Finalize its definition of fiduciary regulatory initiative
- Require better disclosure of distribution assistance conflicts.
- Patricia Flynn (INTECH Chief Compliance Officer) noted that the SEC is now including in enforcement releases the names of the OCIE examiners whose work contributed to bringing the action. Ms. Flynn suggested that advisers who are being examined may want to Google the names of their examiners to see if any of the examiners have been mentioned in enforcement cases. This may indicate an examiner’s particular expertise, which could in turn provide a clue to the focus of the current examination.
- John Walsh (Sutherland Asbill & Brennan LLP) identified five new skills that compliance officers will need for the future, and provided resources for further exploration of these skills:
- Computer Programming
- Human Resources
- Interviewing and Interrogation
- Behavioral Ethics
- Risk Management
- Daniel Sibears (FINRA EVP/Member Regulation Programs)
- Compensation continues to be an issue. Dan stated that FINRA will not only focus on the appropriateness of RR compensation especially related to higher compensation for certain products "Product Pushing" and the suitability of those products.
- FINRA continues to focus on use of social media and how firms use it and the potential investor protection issues. FINRA has it on their agenda and SM will be a focus of examinations this year.
- Cyber scams, Regulatory Notice 12-05 is very important. FINRA seeing more client accounts being compromised. Looking for proper controls related to wiring of funds and customer protection.
- Amy Sochard (Director of Advertising Regulation, FINRA ) discussed the importance of supervising vendors to whom a broker-dealer outsources key activities - Proposed FINRA Rule 3190 addresses the issue in detail.
- Kevin Carreno (President, Experts Counsel, Inc. and Ex-Officio member of the FINRA Small Firm Advisory Board) indicated that the FINRA voluntary Risk Control Assessment survey that was just conducted for the second year will ultimately become mandatory.
Thank you to all who participated in the NRS Spring 2013 Compliance Conference – speakers, exhibitors, sponsors and attendees. We look forward to seeing many of you again at the NRS Fall 2013 Conference in Las Vegas on October 9-11.
(Top of page)
ComplianceMAXTM Continuing Education Module
Are you happy with your current compliance continuing education option? If you are tired of your current solution’s stale content, poor customer service and inefficient reporting you may want to explore a better solution, NRS ComplianceMAX Continuing Education Module. Our recently updated Continuing Education Module can deliver:
- Fast and easy set-up and implementation
- 120+ FIRM Element Courses, continually updated
- Annual Compliance Meeting Modules and Insurance CE courses
- Annual Compliance Questionnaire, Training Assessment
- Excellent customer service
- Robust student and company reporting
As a core component of the ComplianceMAX application, the Continuing Education Module allows you to design and implement a training solution that meets the specific needs of your organization:
- 130 Firm Element Courses
- 120 Topics for your Annual Compliance Meeting
- 350 Insurance CE Courses
- Courses that qualify for Chartered Retirement Planning CounselorSM or CRPC® Professional Designation continuing education credits
- Optional Annual Compliance Questionnaires
- cMAX Firm Element Needs Analysis Tool
- And much more
Register for a ComplianceMAX Demo today or contact us for more information.
(Top of page)
NRS Summer Session - Investment Adviser Compliance Symposia
Face-to-face. In-person. Bricks and mortar.
Call onsite education what you’d like. NRS Education calls it an opportunity to spend two days immersed in compliance topics with other compliance professionals and industry experts.
The NRS Investment Adviser Compliance Symposia are held in interactive classroom settings where learning, relevant to the needs of today’s firms and their compliance professionals, is encouraged through:
A series of three sessions each day provides compliance professionals with the opportunity to get the facts in critical compliance areas:
- A systematic presentation of rules and best practice by leaders in the industry – attorneys, former regulators, and practitioners; plus
- An exchange of ideas among all participants to help apply what is learned to development of enhancements for the compliance function.
New York Investment Adviser Compliance Symposium – June 11 and 12, 2013
Day 1 - Disclosure (Form ADV Parts 1 and 2, and Investment Adviser Performance and Advertising)
Day 2 - Trading Compliance (Trading Practices, Best Execution, Soft Dollars, Directed Brokerage, Valuation and Trade Errors)
Chicago Investment Adviser Compliance Symposium – July 23 and 24, 2013
Days 1 and 2 - Investment Advisers Act of 1940 A to Z
Pick and choose individual sessions or attend all days to refresh your firm’s approach to investment adviser compliance.
Space is limited register today!
(Top of page)
Risk Assessments take Center Stage
Risk management has been a major talking point in messages delivered by the top regulators in speeches, interpretive materials and in face-to-face meetings with industry leaders. SEC and FINRA have both been very clear as to how their examiners will be focusing on the level of involvement the senior management has in its risk controls and whether they utilize risk assessments as part of their compliance programs to help mitigate their risks.
Both regulators have stated that firms cannot have an adequate compliance program without appropriate risk controls. At this year’s FINRA Annual Conference Richard G. Ketchum, Chairman and Chief Executive Officer, stated that the recently released 2013 Risk Control Assessment (‘RCA”) survey is a central part of their risk-based examination program. The RCA helps FINRA better understand firm's business activities, products and services. It also helps them identify and assess the integrity of controls firms have to manage their underlying risks.
Throughout this year’s conference, FINRA’s management team talked about the changes they are making to their regulatory programs to focus on areas that pose a real risk to investors. A few firms have been involved in a pilot program that streamlines the process of examining firms. FINRA now arrives at an exam armed with more firm-specific data which in part was derived from the completed RCA, instead of using the standard set of exam questions and prescriptive review steps used in the past. This leads to a more focused and true risk-based exam program review.
NRS often finds that firms fail to develop a process to identify and document findings of potential risk areas in their business. Developing a formal risk assessment should be a part of every firm’s strategy to mitigate regulatory, market and business risks. As a best practice, a risk assessment for Broker-Dealers should include a review of policies and procedures, disclosures, testing protocols, changes to business practices or heightened supervision of an individual or a particular business area. Strong supervisory systems and internal controls are the cornerstones to mitigating identified risks and also helps protect your clients. NRS believes Broker-Dealers should continually review and assess the business, financial and regulatory risks that could impact their business. Firms must prioritize and execute plans that lessen the potential possibilities from these issues. This process, known as a Risk Assessment, is often minimized, performed only once, or initiated only when major changes impact the business. The regulators have made it clear that a sound compliance program is one which inventories risks and takes necessary steps to implement a strategy to minimize the impact of those risks.
While many firms are capable to performing their own risk assessment they seldom get done in a timely or meaningful manner. NRS Consultants can provide an objective third-party perspective while incorporating regulatory requirements and NRS’s deep knowledge of industry best practices to help you better identify existing and emerging risk areas for your firm.
To find out how NRS can help you contact us today.
(Top of page)