Navigating Compliance as a Broker or Registered Rep
As a broker or Registered Representative (“Registered Rep”), you have many responsibilities to both your firm and your clients. Upholding the principles of integrity, transparency, and client best interest is vital when fostering trust and confidence in your professional capabilities.
Responsibilities to Your Firm
When it comes to your responsibilities to your firm, first and foremost you must follow all applicable securities laws and regulations. It is up to you to understand and comply with your firm’s compliance procedures.
From keeping your professional information up to date on your Form U4 and reporting your Outside Business Activities and identifying and mitigating conflicts of interest, you not only protect your clients, but also yourself and your firm.
Responsibilities to Your Clients
As a Registered Rep you also have many obligations to their clients, including, but not limited to:
- Providing Material Disclosures. Your clients (and potential clients) place their trust in you; it is up to you to ensure they receive accurate and full disclosure of all material information regarding investments; this includes refraining from misrepresentation or omission, and avoid guaranteeing against investment losses.
- Opening Accounts and Knowing Your Customer. You must comply with FINRA rules to gather accurate customer information during account opening, including identity verification and background reviews.
- Reporting Financial Exploitation of Specified Adults. Be vigilant for signs of financial exploitation of specified adults and promptly inform supervisors if exploitation is suspected.
- Ensuring Privacy and Protection of Customer Data. In today’s world, information security is paramount to protect your customers and your firm. As a Registered Rep you must maintain confidentiality and promptly report any loss or theft of customer information to supervisors.
- Maintaining Cybersecurity Vigilance. Familiarize yourself with cybersecurity best practices, such as encryption and strong password protection. Be familiar with your firm’s incident response plan.
- Meeting Best Interest Requirements. Know your customers’ investment profiles before making recommendations to ensure that recommendations are in your clients’ best interest. Do not put your interests or the interests of your firm ahead of those of your clients.
- Understanding Securities Transactions. Educate your customers on securities transactions and settlement processes. It is important to communicate clearly and to obtain explicit permission for each order. Registered Reps must comply with FINRA rules regarding fair pricing and disclosure of fees.
- Understanding Markups, Commissions and Fees Charged for Services. Charge fair commissions and markups according to FINRA guidelines. Avoid excessive fees or charges and disclose all charges upfront to customers.
- Protecting Customer Funds and Accounts. Avoid mishandling customer funds or engaging in misleading practices such as parking securities. Refrain from sharing profits or losses with customers and comply with rules regarding borrowing or lending money between yourself and your customers.
- Managing Customer Complaints. Promptly report and respond to customer complaints in accordance with FINRA rules, maintaining records and notifying supervisors. Do not attempt to resolve complaints unilaterally. Ensure proper filing of complaints in the CRD system.
- Avoiding Manipulative, Deceptive and Fraudulent Actions, Insider Trading. Adhere to rules prohibiting manipulative, deceptive, or fraudulent actions, including insider trading. Refrain from using or passing on material nonpublic information and promptly report any suspected violations to supervisors.
Additional Resources:
Reg BI Enforcement Surge Continues
Protect Your Vulnerable Customers: Combating Investor Fraud
FINRA AML Program Expectations
In the securities industry, Registered Reps must be honest, have integrity, and always put their clients’ needs first. Broker-dealer firms have compliance programs designed to mitigate risk to clients, employees and the firm as a whole. It is important that you do your part to mitigate those risks.
Compliance Support from the Experts
Oyster Consulting provides the risk and compliance consultants that Broker-Dealers and Investment Advisors need to achieve compliance. Our regulatory compliance consultants provide guidance, support, and expertise to help your firm navigate the complexities of the securities industry.
