Audit Outline Branch Business Mix TO BE COMPLETED BY OSJ OR PERSON IN CHARGE

Transcription

1 Business Activities: Audit Outline Branch Business Mix TO BE COMPLETED BY OSJ OR PERSON IN CHARGE A. Types of business (approximate % breakdown): % Commission % Investment Advisory % One time Financial Plan Fee B. Types of sales activities (approximate % breakdown): % Mutual Funds (Circle Share Classes used: A B C R Other ) % Variable Annuities % Fixed / Equity Indexed Annuities / Insurance % Equities (MLPs, Common, PFD, Warrants, Rights, ETFs) % Municipal Securities (Bonds, 529 Plans, Mutual Funds) % CDs % Asset Backed / Mortgage Securities % U.S. Treasury / U.S. Government Agency % Options / Puts & Calls / Spreads % Corporate Fixed Income / High Yield % Structured Products: Equity Linked CD s / Buffered tes / Principal Protected tes % Unit Investment Trusts % Retirement Plan Platforms % Third Party Investment Managers Other Sources of Income from Outside Business Activities (please describe): Are Outside Business Disclosure Letters being used? (If yes, please attach sample) General Business Information: Do you have a business plan? (Attach copy if yes) Are the operating income and expenses for the office paid from a: Personal checking account used for business? DBA business checking account? Personal checking account? Audit Outline Branch Business Mix For LMK Internal Use Only Page 1 of 7

2 Name of Bank: Are canceled checks available for inspection? Are incomes or expenses for any other types of business processed through this account? Are fees paid to others from this account for referral of advisory clients? Are fees paid to others from this account for referrals of securities clients? Do you have a plan for succession if something happens to you or if you are planning to retire or cut back? Describe (attach copies if applicable): Security and Protection of Client Data What is your system for purging client files? Are there any individuals, other than those registered with LMK, renting space or conducting any related/unrelated business activities in this office? If yes, list name(s) and type of business conduct: Does the office have a safe, strong box, locking file cabinet or other means of safely storing valuables overnight? Comments: Are all of your employees encrypting s that contain sensitive client data? Do your employees know where to access the L. M. Kohn & Company Identity Theft Protection Program on our website? Have any third party check, journal or wire requests been processed without completion of a Change of Ownership Form? Have copies of all Change of Ownership Forms been forwarded to the home office? Have any clients contacted your office stating that they have received notification that their information has been stolen or compromised from an outside account or the IRS? Audit Outline Branch Business Mix For LMK Internal Use Only Page 2 of 7

3 If yes, did you notify the home office? N/A Are you forwarding all address and name change requests to the home office? What are you doing to prevent Lost accounts? Order Processing Procedures and Supervision: Have there been any transactions where proceeds of the sale of mutual funds were invested in other mutual funds? If so, has a switch letter been completed? Are all mutual fund orders checked for possible breakpoints? Do all of your branch mutual fund customers receive a copy of the Mutual Fund Share Class Fee, Expense and Rick Disclosure document? What is your follow up system for tracking transactions and service requests directly at the mutual fund company? Are Variable Annuity / Equity Indexed Annuity applications sent to the home office for review within six (6) days of client signature date? N/A Are you a trustee of any client trust account (other than immediate family)? If yes attach latest statement from account and describe the relationship: Has your branch sold any Equity Indexed Annuities (EIAs) / Fixed Indexed Annuities (FIAs) that are not on the LMK approved list? Has your branch sold any private, non-publicly traded REITs/LPs/DPPs or similar programs in the last year? Have any seminars been conducted in the last year? If yes, who was the speaker? What was the topic? Are research reports for clients prepared by your office? Do you use to correspond with your clients? Audit Outline Branch Business Mix For LMK Internal Use Only Page 3 of 7

4 Are you currently utilizing Profitability.Net for your service as required by the LMK Compliance program? How many accounts do you use? Which account do you use for securities related business? Does your branch prohibit the use of instant messaging and texting of securities related business to clients per LMK policy? Does your branch or any representatives use LinkedIn, Facebook or any other electronic social networking sites for securities related business? Are these sites being captured in Global Relay? Are all securities-related written correspondence forwarded to / reviewed by the OSJ? Are investment policy statements prepared for some, all or none of your clients? Some Y/N All Y/N ne Y/N If only some, what is the profile you use to decide with whom to execute them? (attach samples) How is suitability determined for client investments? How do you assess client risk tolerance? (Describe and/or attach documents you use) What is the primary means of communication with clients? Is a Securities Log maintained and kept current for all orders (other than brokerage a/c trades?) Have any security transactions, public or private of any kind, been made through this office that is not shown on the blotter of this office? Do any registered individuals at this office receive securities commissions from sources other than LMK? If yes, from where? For what? Audit Outline Branch Business Mix For LMK Internal Use Only Page 4 of 7

5 FINRA Conduct Rules: Are you familiar with the FINRA Conduct Rules regarding private securities transactions, written notification regarding other employment compensation, and prohibitions against trading based on inside information? Does a Customer Acknowledgment Form/Arbitration Agreement accompany all first transactions orders? Are they submitted through and signed by the OSJ? Are you aware of any orders that have been entered without the client s knowledge and approval? Are all RRs at this office aware that they may not conduct securities business with residents of other states without registering in those states, even for joint rep code accounts? Are all orders reviewed for adherence to suitability standards as established for the product? Are all orders reviewed to determine if investments are within the client s ability to pay and financially bear the risk of loss? Is there evidence of excessive trading or churning in any client account? Has any rep at this office personally purchased a security from a client? Does anyone assigned to this office have any unusual agreements or special arrangements with any clients concerning charges for services rendered? Are RRs at this office aware of, and do they comply with, the policy that marking, highlighting or in any other way emphasizing specific portions of brochures, sales materials or prospectuses sent to clients is prohibited? Comments: Who is responsible for opening all incoming mail in this office? Is all incoming correspondence stamped as to the date of receipt? Audit Outline Branch Business Mix For LMK Internal Use Only Page 5 of 7

6 RIA - Please Circle One NONE / LMK / Independent SEC Registered / Independent State Registered: Does anyone at this office provide investment advisory services or financial planning services for a fee? (If OSJ please list reps) If yes, who: If no, you may skip this section. Are written financial plans prepared? Are quarterly or annual performance reports prepared? (if yes, attach a sample) Are any other types of written reports prepared? (if yes, attach a sample) Approximate number of advisory or planning clients: If Independent RIA, do advertising, business cards and letterhead properly disclose that your RIA activities are not affiliated with the RIA or B/D operations of L.M. Kohn & Company? In what states do your advisory clients reside? Are financial plans on file? Are Investment Advisory Agreements and all billing invoices on file for accounts not custodian at TD or RBC? (Attach sample invoice) Does anyone in this branch execute trades away? If yes, where? Are investment advisor trades that are executed away from LMK available for review in hard copy or on line access? N/A Are outside advisors or third party managers used? If yes, who: Comments: Audit Outline Branch Business Mix For LMK Internal Use Only Page 6 of 7

7 I affirm that the information contained herein, including exhibits attached hereto, is accurate and complete. Signature: Print Name: Date: Signature of Auditor: Print Name: ATTACHMENTS as noted above and: Business Cards of Registered Individuals (copies are satisfactory) Branch letterhead Yellow and/or white page advertising (copies are satisfactory) Audit Outline Branch Business Mix For LMK Internal Use Only Page 7 of 7