Regulatory Compliance E-newsletter – June 2016

Feature of the Month

The DOL Fiduciary Rule: Act One

Understand the essence of the rule and how it applies to your firm

NRS understands the confusion and stress that come with new rules (and a new regulator!).  We are here to help you navigate the sea of information, speeches and regulatory releases (currently over 1,000 pages) by providing a step by step approach. Our Act One service will provide you with the information you need today to determine what practical steps you need to take now and to plan for meeting the regulatory deadlines.

The DOL Fiduciary Rule Act One includes:

  • A review with an NRS consultant that will guide you through the fundamentals of the new rules and how they specifically apply to you, your firm, and the products and services you offer.
  • What you need to do now to prepare for the two critical deadlines – April 2017 and January 2018.
  • What circumstances will require a Best Interest Contract (“BIC”) or if you may be able to use the less burdensome “BIC Lite.
  • Pros and cons of segregating retirement and non-retirement accounts.
  • A written summary, including a time line of your obligations, based on your current business model.

Our 30+ years of compliance experience have shown us that the first step in addressing a complex issue is to break it down into its fundamental components as they apply to your firm.   With this foundation you can identify the correct initial steps and have confidence in your action plan. This is the first crucial step in helping you navigate this rule. NRS will be here with you throughout the process. Let’s take the first step together.

If you would like to make sure your firm is up for existing and yet to come challenges, please contact us today.

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Manage Your Branch Audit Program Efficiently

Regulators continue to escalate their initiatives for the identification of outside business activities, fraudulent actions and other potential deficiencies through the branch inspection process. Keeping accurate records and implementing a risk-based approach to branch audits is the key to staying out of harm’s way.  NRS’s cMAX Audit Technology will not only help increase the efficiency of your audit team, it will turn a manual review, approval and corrective action process into an electronic one. All supporting documentation will be stored together with the audit form ready and available for review and reporting. 

ComplianceMAX Audit Technology can:

  • Automate the assignment of audits to the audit team
  • Monitor the status of audits from auditor assignment through a completed audit report
  • Issue Alerts as audits are assigned, completed and reviewed
  • Store all documentation, artifacts and images associated with an audit on-line
  • Automatically flag findings for deficiencies or issues, and automate corrective actions
  • Allow an auditor to drill-down into a flagged issue through the use of Dynamic audit questioning
  • Identify risks and trends among or across specific branches or OSJ’s
  • Store and report all audit records and documents providing reporting in full compliance with 17a-4 books and records rules 

Under the increased scrutiny of today’s regulatory environment, you need a risk adverse audit program. Register today for a ComplianceMAX Audit Technology demo.

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Education and Continuing Education

Is there a difference between education and continuing education? Definitions, research and opinions vary. Both can be enriching experiences and NRS Education supports the mainstream definitions that focus on education as foundational knowledge and continuing education as an expansion on foundational knowledge as well as a vehicle to keep current on new developments within the field of investment adviser and broker-dealer compliance.

Both education and continuing education can offer compliance professionals the opportunity to maintain licenses, certifications and designations, expand skill sets, remediate learning gaps, and could even be a path to a higher-level position.

NRS Education has been providing education for 30 years and has been provider of continuing education – as documented by NRS’s ability to maintain continual approval from several CE agencies for meeting continuing education criteria – since 1994. NRS Education events are designed to meet criteria for continuing education credits for attorneys, CPA/accountants, certified financial planners, compliance professionals, and other financial securities professionals. Earn CLE, CPE, CFP® and IACCP® credits while developing and updating the firm’s compliance program.

NRS Education offers compliance professional the opportunity to gain foundational education and earn continuing education credits with flexible online and onsite options.  View the NRS Education Calendar and note the new onsite events, which can give you the opportunity to gain foundational knowledge and keep you ahead of the curve on examinations, cybersecurity, ethics, ERISA, advertising, AML and more include:

  • NRS Topical Compliance Conference for Investment Advisers and Broker-Dealers
    New York, NY – September,  2016
    An opportunity to expand your compliance knowledge and prepare for emerging topics of broad and current interest, including the DOL fiduciary rule, cybersecurity and advertising.
  • NRS Investment Adviser Compliance Symposium
    Chicago, Illinois –  July 19-21, 2016
    Participate in discussions on timely investment adviser compliance topics in a classroom setting. Pick and choose individual sessions or attend all days to get the basics and refresh your firm’s approach to investment adviser compliance.

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“Compliance Culture:” Not just a catchy “catch phrase” anymore……

It’s here.  It’s real.  And FINRA is setting about solidifying measures by which to identify it.

Call it a “culture of compliance” or a “compliance culture,” the message is the same……..paying lip service to compliance, and occasionally having to say “Oops” moment, isn’t going to work any longer.

In its 2015 “Exam Priorities” letter, FINRA stated the following:

“A firm’s culture contributes to, and is also a product of, a firm’s supervision and its approaches to identifying and managing conflicts of interest and the ethical treatment of customers. Given the significant role culture plays in how a firm conducts its business, this year the letter addresses how we will formalize our assessment of firm culture to better understand how culture affects a firm’s compliance and risk management practices. Our emphasis on culture is also closely aligned with supervision, another area of focus for 2016. We plan to consider supervision generally and supervision specifically related to conflicts of interest. We urge you to review your supervisory, risk management and control systems—as well as the other issues we raise in the letter—as part of your overall programs”

Over the past several months, FINRA has been engaged in a sweep that the regulator hopes will give them sufficient information about how firms have established and are maintaining their cultural values among their personnel … or, how they haven’t.

“Knowing firms’ practices in this area, and the challenges they face, will help FINRA develop potential guidance for the industry and determine other steps that could be taken.”

In order to help FINRA in its reviews to determine the level of a broker-dealer’s compliance culture, it has attempted to define the termOne definition of ‘firm culture’ is the set of explicit and implicit norms, practices and expected behaviors that influence how employees make and carry out decisions in the course of conducting the firm’s business. Your firm may have its own definition of “firm culture” that it can use to prepare for our meeting and respond to this [sweep] letter.”

Of the eight specifics FINRA requested of the firms which received the sweep letter, the following were included:

  • “How and by whom policies and procedures are set that establish compliance culture. Is it a board level discussion/decision? Is there a “tone from the top?” 
  • “How do you assess and measure the impact of cultural values and the differences they have made in employee behaviors (with documentation and copies of policies and procedures to back up response statements.”

Clearly, everyone … from the Chairman of the Board to the CEO and from supervising principals to the newest on-boarded registered representative … are going to have to be enlisted to create, and maintain, a top to bottom and bottom to top culture of compliance.  Technology is also going to have to play an important part.

NRS, by relying on the experience gained from providing customized compliance services and solutions to the financial services industry for  over 30 years, is uniquely positioned and adept at helping firms deal with this challenge, as well as many others.

An NRS consultant can work with you to determine how best to develop, enforce and maintain a compliance culture that will stand up to regulatory scrutiny and protect your firm from fines and/or reputational damage. NRS understands the “culture of compliance” that FINRA (and the SEC) is looking for and can assist your firm in developing such a culture. 

If you would like to make sure your firm is up for existing and yet to come challenges, please contact us today.


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