Regulatory Compliance E-newsletter – October 2017

Feature of the Month

Will Your Advertising Program Pass an SEC Exam?

Advertising is a perennial focus of SEC examinations, and this shows no signs of changing. In September, the Office of Inspections and Examinations (“OCIE”) published a Risk Alert on Advertising Rule Compliance, which highlighted common deficiencies relating to Rule 206(4)-1 of the Investment Advisers Act of 1940. The Risk Alert aims to encourage advisers to assess their supervisory, testing, and risk-management systems, to ensure that advertisements are consistent with relevant advertising rules and fiduciary responsibilities.

In the Risk Alert, the SEC highlighted some of the common deficiencies observed during exams.

  • Misleading Performance Results: Advisers presented performance results without properly deducting fees. Advisers also compared performance results to a benchmark, without properly disclosing the limitations of such comparisons. Lastly, advisers used back-tested results without disclosing how these returns were derived, and without disclosing the limitations on their meaningfulness.
  • Cherry-Picked Profitable Stock Selections: Advisers created advertisements that only included profitable stock selections and recommendations, and/or contained misleading selections of investment recommendations.
  • Compliance Policies and Procedures: As always, SEC staff look for policies and procedures reasonably designed to prevent deficient advertising practices.

NRS wrote an extensive blog on the subject and the associated alert which can be found here.


NRS’ technology and consulting services can assist advisers in meeting their advertising compliance obligations. Our consultants can review and enhance the firm’s advertising policies and procedures, assess supervisory and risk-management systems and review advertising materials via a proprietary technology platform that provides seamless and efficient workflow among various process stakeholders and designees, including NRS consulting staff.

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Five ways to speed up advertising and communication review

The recent FINRA Advertising Regulation Conference held in Washington DC underscored the importance and complexity of complying with advertising rules. As outlined in our recent feature story and blog, a recent risk alert is encouraging firms to assess their supervisory, compliance and / or other risk management systems as related to their advertising activities and make the appropriate changes.

It is more important than ever to be efficient in meeting these challenges. Here are five ways that automation can benefit the process:

  • The ability for consistent and complete submissions – An automated form that asks the right questions and requires the appropriate answers can ensure that the request for review is complete and correct the first time. The best forms offer “conditional questions” meaning that an answer to the first question can modify the rest of the form so the submitter sees only what is relevant to their specific type of communication.
  • Automated workflow and notifications – As your advertising and communication pieces work their way from submission to approval, they are automatically routed to the correct parties at each step of the process. When input is required or a piece is approved, automatic notifications can be sent to eliminate waiting and wondering.
  • Built-in annotation – With a feature-rich annotation capability built-in to your review solution annotating submitted documents is quick and easy. Simply click to open the document, make annotations then click once more to return the updated piece to the submitter.
  • AREF integration – A fully automated solution is connected to FINRA so any piece that requires submission is automatically sent and review letters are automatically received.
  • Automatic compliant storage – The approved piece and evidence of the approval process must be stored in 17a-4 compliant storage. A fully automated solution will include compliant and secure storage so there is no extra step to worry about at the end of the process.


The right technology can speed up review and reduce risk. If you are ready to automate, contact us today and learn more about NRS Ad Review. As part of the ComplianceMAX suite, NRS Ad Review helps you meet your compliance needs and advertise with confidence. Go here to learn more.

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Securities Industry Essentials (SIE) Exam – 12 Short Months Away!

Following a moving timeline over the past couple of years, FINRA announced during their Advertising Regulation Conference earlier this month that the Securities Industry Essentials (SIE) exam will be going live on October 1, 2018.

The new SIE exam will be open to everyone, allowing candidates to sit for a core knowledge exam without sponsorship from a FINRA member firm. Presently, candidates must be sponsored by a FINRA member broker/dealer to sit for a Series exam. After passing the new exam, a candidate must then be sponsored by a FINRA member firm to sit for a specialty “top-off” examination (Series 6 or Series 7) for eligibility to register as a new representative.

NRS is closely monitoring FINRA’s SIE Exam implementation, and will offer guidance to users ahead of the launch, including a prep-course.

What can you do in the meantime? Use our FIRE Exam Prep for the Series 6, 7, 9/10, 24, 63, 65, & 66 featuring student mentoring by our team of expert trainers and the highest pass rates in the industry, coupled with online training:

  • Detailed course syllabus breaks down the material into manageable segments, describing exactly what to study and the corresponding number of test questions you will see on the exam
  • Thousands of test questions arranged by topic and aggregated into comprehensive exams which simulate the FINRA exam experience
  • Assessments designed to test comprehension of topics and build a strong foundation that will allow recall of concepts and application to any scenario-based question
  • Live, web-based tutorials give you access to expert trainers who provide invaluable test taking tips and memory tricks to give you an edge that self-study alone just can’t provide
  • Recorded tutorials covering every course module available 24/7
  • Executive Summaries highlight need-to-know information ideal for flashcards

As an NRS eNews reader, enjoy or share a 10% discount on all exam prep by entering coupon code “NRS” in our online enrollment form:

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A-G-G-R-E-G-A-T-I-O-N: Difficult to spell, even more difficult to comply with your Policies & Procedures and FINRA Rule 3220.

You are most likely familiar with the $100 rule, from Rule 3220:

No member or person associated with a member shall, directly or indirectly, give or permit to be given anything of value, including gratuities, in excess of one hundred dollars per individual per year to any person, principal, proprietor, employee, agent or representative of another person where such payment or gratuity is in relation to the business of the employer of the recipient of the payment or gratuity. A gift of any kind is considered a gratuity.

With advisers offering gifts of appreciation to their high net worth clients, they must also ensure that the gifts are free and clear of conflicts of interest, favoritism and obligation. Compliance departments are the first line of defense in aggregating all gifts given by the Firm and its associated persons to a particular recipient. To accomplish this, the right policies need to be put into effect, and the right solution needs to be implemented that allows a firm to ensure regulatory and firm limits are maintained across an entire organization. Overall, the key will be to:

  • Increase transparency
  • Monitor and Refine
  • Comply with FINRA Rule 3220.


How can you easily ensure your reps are aware of gifts given by associates across your Firm to a particular recipient? 

Using NRS’s PowerComply Gift & Entertainment system, your reps are able to view in aggregate, the amount gifted from your company to the external associate prior to providing the gift or when requesting pre-approval. 

Compliance departments must aggregate all gifts given by the Firm and its associated persons to a particular recipient, which PowerComply does automatically.  Run the Summary Report to review all gifting history by recipients and company in aggregate, while the Item Detail Report is available for review of each individual transaction. 

Additional transaction and aggregate limits by dollar and occurrence are configurable for tracking of all gifts, entertainment, and non-cash compensation.   Integration with Travel & Expense, HR, CRM, Registration and other internal systems is available to minimize duplicate entry and validate transactions against regulatory and your Firm’s limits.

PowerComly offers “right-sized” and “right-priced” implementations from small Broker/Dealers and Investment Advisers to the largest of enterprise customers.  It’s time to move from your gift log or spreadsheet to PowerComply, for easy A-G-G-R-E-G-A-T-I-O-N of all gift, entertainment, and non-cash transactions for ongoing compliance.

Find out more here.

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