Compliance. Organize your Year-End Compliance Clear Out.

Transcription

1 Compliance Organize your Year-End Compliance Clear Out This document is for informational purposes only. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, or distributed to any other party, without the express written permission of DLA, LLC.

2 Jessica Rodgers, CAMS Manager in the Compliance department at David Landau & Associates, LLC Over five years of experience in the financial services and securities industries and provides advisory to broker-dealers and investment advisers including AML services, risk assessments and implementing compliance programs. Jessica is a Certified Anti-Money Laundering Specialist (CAMS) and holds FINRA Series 7, 63 and 99 licenses Michelle Inferri Director, Sales at MyComplianceOffice Our powerful software solutions deliver compliance programs that will synchronize your business needs with the demands of regulation in your sector. The automation that MyComplianceOffice brings will reduce the complexities, the time and the costs associated with managing a modern compliance management program. Choose from our comprehensive suite of configurable solutions, with modules that cover Anti-Corruption and Anti-Bribery Procedures, Supplier Management and Conflicts of Interest management such as Gifts and Entertainment, Insider Trading and other code of conduct activities.

3 As the end of 2015 approaches, registered investment advisers (RIA) and broker-dealers (B-D) should be focusing on addressing their year-end compliance obligations. This presentation focuses on the annual regulatory requirements and best practices for B-Ds and RIAs to achieve compliance. These important activities should help you create a proactive compliance calendar to achieve a strong and effective compliance program.

4 RIA Regulatory Requirement: 206(4)-7 Review, no less frequently than annually, the adequacy of the policies and procedures established pursuant to this section and the effectiveness of their implementation. Can be conducted internally by the CCO or in conjunction with an independent third party consulting firm Consider conducting a mock SEC audit The review should include testing on SEC areas of focus as it relates to your firm's business B-D Regulatory Requirement: FINRA Rules 3110, 3120 and 3130 Each member shall conduct a review, at least annually (on a calendar-year basis), of the businesses in which it engages. The review shall be reasonably designed to assist the member in detecting and preventing violations of, and achieving compliance with, applicable securities laws and regulations, and with applicable FINRA rules Members must ensure that each ensuing annual certification is effected no later than on the anniversary date of the previous year's certification

5 RIA and B-D Best Practice During the annual compliance review, it is a good time to update your firm's risk assessment and identify any changes in controls or the firm's business that have been implemented in the last year.

6 RIA and B-D Best Practice During the annual compliance review, it is a good time to update the firm's compliance manual to incorporate any changes to the firm's policies and procedures that have taken place in the past year or that were identified as areas for enhancement in the coming year. RIA If your manual hasn't been updated in a few years, things you will want to consider incorporating are: B-D Form P-F filing requirements Whistleblower Policy that includes reference to the SEC's Whistleblower program FINRA Rule changes in the last year: Effective December 1, 2014 NASD Rule 3012 (Supervisory Control System) is no longer in effect and has been replaced with FINRA Rule 3120 NASD Rule 3010 (Supervision) was replaced with FINRA Rule 3110 Rule 3110 introduces a new element to the previous rule that will require a Firm to conduct an investigation into an individual s qualifications and character prior to filing an application for registration

7 RIA Best Practice The end of the year is a good time to meet with all employees for a formal compliance training session. Areas you may want to focus on: Code of Ethics requirements, conflicts of interest, insider trading, gifts & entertainment reporting requirements, and political contributions/ pay-to-play compliance With the emphasis the SEC has placed on cybersecurity in the last year, consider bringing in your IT provider to do employee training B-D Regulatory Requirement: FINRA Rule 1250 and 3110 Firm Element & Training Plan - Each member must maintain a continuing and current education program for its covered registered persons to enhance their securities knowledge, skill, and professionalism. At a minimum, each member shall at least annually evaluate and prioritize its training needs and develop a written training plan. Annual Compliance Meeting - All registered representatives and principals are required to meet either individually or collectively at least annually in an annual compliance meeting with the CCO

8 RIA Regulatory Requirement: 206(4)-A-1 Access Persons are required to complete an Annual Holdings Report with respect to their personal securities holdings. The report must be current as of a date not more than 45 days prior to the report being submitted. Consider having employees complete a Code of Ethics Re-Certification that states they have re-read, understood and complied with the Code B-D Best Practice It is a standard industry practice to require employees to complete annual certifications for: Compliance Manual & Code of Ethics, Outside Business Activities, Private Securities Transactions, Outside Broker Accounts & Personal Securities Holdings Review all of the employee attestations to ensure that anything that would require additional action (such as updating an employee's U4)

9 RIA Regulatory Requirement: 206(4)-7, As part of an adviser's fiduciary duty to its clients and under the SEC's books and records requirements, the SEC would expect to see that a firm has a business continuity and disaster recovery plan in place and that the effectiveness of this plan is tested regularly. B-D Regulatory Requirement: FINRA Rule 4370 FINRA requires firms to create and maintain written business continuity plans (BCPs) relating to an emergency or significant business disruption. Each broker-dealer must have a member of senior management who is a registered principal conduct an annual review of its business continuity plan to determine whether any modifications are necessary

10 RIA Best Practice While optional, in light of FINRA's proposed rulemaking and in response to a growing trend of investor pressure for advisers to have AML programs, several investment advisers have begun conducting annual testing of their AML policies and procedures. B-D Regulatory Requirement: FINRA Rule 3310 FINRA's AML Rule requires most firms to conduct an independent audit of their AML program on an annual basis (calendar year). Cannot be conducted by the AML Compliance Officer, a person who performs the AML functions being tested, or by someone who reports to the AMLCO or a person who performs the AML functions being tested

11 What is MyComplianceOffice? Document Library Policies and Procedures Personal Trading Case/Issue Tracking Compliance Calendar Document & Report Review Certifications, Attestations & Affirmations Gifts and Entertainment, Political Donations Custom Forms, Questionnaires & Checklists

12 Click on graph to see all open personal trading alerts Click on graph to see all open employee requests Click on graph to see details of cases Click on graph to see details of all open assignments

13 Benefits of Automation Before.After Reduces Costs, Risks, Saves Management Time, Demonstrates Culture of Compliance to Regulators and Investors

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15 Jessica Rodgers, CAMS Manager, Compliance David Landau & Associates, LLC D: Michelle Inferri-Tauss Director, Sales TerraNua D: