Leverage Registration Renewal For Oversight Of Representatives and Branch Offices
As the year ends, broker-dealers and investment advisors should begin to focus on the renewal process for their firm, registered representatives (RRs) and/or investment adviser representatives (IARs), and branch offices for the following calendar year.
Broker-dealers and investment advisors should have written policies and procedures in place to ensure the firm, RRs, IARs, and branch offices are appropriately registered, notice filed, or eligible for an exemption prior to conducting business in required jurisdictions. The renewal period is a great time to conduct this assessment.
What Firms Should Be Doing
Firm procedures should be reasonably designed to ensure compliance with registration requirements for activities engaged in and the necessary jurisdictions. If exemptions are being used, the firm should ensure that they comply with the terms of those exemptions.
While going through the annual renewal process, firms should
- reconcile the Preliminary Statement with the firm’s records. The Preliminary Statement reflects the current registration information for the firm, RRs/IARs and branch office registrations based on information shown in CRD;
- identify any individuals and/or branch office locations which do not show a record of registration on the Preliminary Statement in a jurisdiction in which activity is taking place;
- determine any registrations that should be terminated, either in part or whole; and
- reconcile the Final Statement received from FINRA in January to determine that each adjustment made by the firm was successfully accomplished.
Should it be determined that individuals or branch offices are operating in an unregistered capacity, and not eligible for an exemption, the firm should immediately file a Form U4 or Form BR as required. As a result of these updates, the firm may receive a deficiency letter requesting information on the timeframe for the unregistered activity, volume of transactions and commissions and/or fees collected by the unregistered individual or branch. Firms should respond to such requests immediately; failure to do so will delay the registration request.
An effective reconciliation program can help identify issues relating to unregistered activity and help avoid regulatory problems, such as regulatory review, sanctions, civil action, and client requests for rescission. In some instances, failure to take such steps has allowed unregistered activity to occur over multiple years, when an effective reconciliation program could have identified the issue during the first renewal cycle after unregistered activity commenced.
Oyster Consulting has worked with broker-dealers, registered investment advisors and individuals to establish effective written policies and procedures and/or desk procedures addressing initial and renewal registrations. Additionally, Oyster has also been an effective resource working with firms and/or legal counsel to resolve unregistered activity with regulators.
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