Broker-Dealer Annual Compliance Meeting Best Practices

Planning for the Task

As the summer solstice approaches, now is a good time for broker-dealer compliance personnel to begin planning for the annual compliance meetings (“ACMs”), required under FINRA Rule 3110(a)(7).  Specifically, each registered representative and registered principal of a broker-dealer is required to attend an annual interview or meeting, during which compliance matters relevant to the particular representative or principal are discussed.[1] 

Broker-Dealer Annual Compliance Meeting Best Practices

While these meetings are not required to be held in person and firms can use other methods of delivery, there are certain controls that must be put into place, which are outlined in FINRA guidance[2] as follows:

A firm that chooses to conduct compliance meetings using other methods (e.g., on-demand webcast or course, video conference, interactive classroom setting, telephone or other electronic means) must ensure, at a minimum, that each registered person attends the entire meeting. For example, a firm might use on-demand annual compliance webcast requiring each registered person to use a unique user ID and password to gain access and use a technology platform to track the time spent on the webcast, provide click-as-you-go confirmation and have an attestation of completion at the end of a webcast. A firm also must ensure that registered persons are able to ask questions regarding the presentation and receive answers in a timely fashion. For example, a firm could host an on-demand annual compliance webcast that allows registered persons to ask questions via an email to a presenter or a centralized address or via a telephone hotline and receive timely responses directly or view such responses on the firm's intranet site.”

This Risk Management Update outlines some considerations and best practice steps that broker-dealer firms can take to help comply with this annual requirement.

Program Development & Design

Planning for ACMs can and probably should be included as part of the firm’s formal continuing education training program that is mandated under FINRA Rule 1240.[3]

The formal training program should be customized to the firm’s size, structure, and business practices, and address current regulatory requirements and guidance, while ACMs should cover specific services, job duties, and recommended investment products applicable to each registered representative and principal.  Importantly, compliance topic included in ACMs should not also be included in the firm’s training program.  

When creating ACMs, compliance personnel should consider taking the following steps:

  • Review the most recent FINRA Regulatory Exam Priorities letter and include any areas of focus that affect your firm.
  • Review the FINRA Disciplinary Actions Database for examples of registered representatives who have been disciplined for rule violations. Consider including areas such as failure to update Form U4, failure to disclose or gain approval for outside business activities, and failure to disclose a “Compromise with Creditors” or another disciplinary item.
  • When designing training slides, include graphics and visuals. Remember – A picture says 1000 words!!
  • Keep slides un-cluttered and easy to read. Too much text can deter a reader.
  • Utilize key words and bullets in slides to make important concepts stand out and keep the reader’s attention.
  • Have some fun and add humor to your training content. This will make it more engaging. Consider including stories and real-life examples of wrongdoing and the corresponding penalties into the training content for emphasis.

Conclusion

Navigating the FINRA rules and developing training materials can be challenging and may pose difficulties for firm compliance personnel.  You should take the proper time to review your firm’s business model, products, proposed products and clients that you are servicing. Also make sure to review both SEC and FINRA regulatory priorities. Taking these steps will allow you to create comprehensive and engaging training content that will meet regulatory requirements.

The consultants at Core Compliance & Legal Services, Inc., have extensive experience in the financial services industry and can help you develop your training programs.  Even if you feel that your training program is in good shape, it always helps to get a second opinion.  Core Compliance consultants have extensive experience in performing reviews and assisting firm with ensuring their compliance program are healthy and appropriate for their business model.

 

For more information about our services, please contact us at info@corecls.com, at (619) 278-0020 or visit us at www.corecls.com for more information.

Author: James L. Smith, Senior. Compliance Consultant; Editor: Tina Mitchell, Lead Sr. Compliance Consultant, Core Compliance & Legal Services (“Core Compliance”).  Core Compliance works extensively with investment advisers, broker-dealers, investment companies, hedge funds, private equity firms and banks on regulatory compliance issues.

 

contact core compliance

This article is for information purposes and does not contain or convey legal or tax advice. The information herein should not be relied upon regarding any particular facts or circumstances without first consulting with a lawyer and/or tax professional.

 

[1] See http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=11345;

[2] See “FINRA Notice to Members 14-10. SEC Approves New Supervision Rules Effective Date: December 1, 2014 at http://finra.complinet.com/en/display/display.html?rbid=2403&element_id=11470

[3] See http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=10204