Understanding Your Responsibilities Regarding the New SEC approved Supervision Rules

By Karla Paxton, Client Engagement Manager, ByAllAccounts on Wednesday, November 5th, 2014

Home Offices and FINRA members do you know what your responsibilities are regarding the SEC approved Supervision rules that go into effect on December 1st

The rule goes into detail what is expected in supervising the following.

  • Communications
  • Holding Customer Mail
  • Supervision
  • Supervisory Controls
  • Taping Rule
  • Transaction Review

Having a way to systemize and automate the supervision will be key to having good supervisory procedures in place. The home office is ultimately responsible for all the actions of the advisor. Registered Reps/Advisors are now looking at their clients overall financial picture; they are monitoring, reporting and advising on holdings that may not be on the Broker Dealer’s suggested investments.  This along with monitoring the advisors trades and their communications (email and phone calls) increases the amount of oversight that is required by the home office.

There are quite a few personal trade monitoring systems available.  These software systems make it easy to have the employees enter their accounts and then the compliance department can create rules to monitor what they are trading within those accounts.  Some of those systems include:

  • Compliance Solutions (Schwab)
  • SunGard Protegent
  • Star Compliance
  • Financial Tracking
  • Terranua MyCompliance Office
  • NRS ComplianceGuardian

Some of these systems offer more than just the personal trade monitoring and can help with your overall compliance needs.  Another Supervisory obligation that has been in the news, is the responsibility the home office has to know what the Advisor is recommending to their clients.  It follows the Know Your Client rule, and the Suitability rule, FINRA 2011.  In the last few years, broker dealer reps have been changing the way they do business.  They are taking a more fiduciary responsibility to their clients and looking at the overall financial picture.  This allows them to give better advice and become the trusted advisor for their client.  They may recommend a fund or investment, such as an annuity that is not part of the broker dealer’s suggested investments.  This puts more work on the home office to make sure the advisor is acting in the best interest of their client.

There are not as many software systems available for this type of monitoring, but here are few that I know of:

  • Riskalyze
  • SunGard Protegent ProSurv
  • Terranua MySurveillanceOffice

Both of these types of monitoring, the personal trade and the suitability, can be done within the firm’s own back office systems.  It requires the ability to pull the data in from various custodians and implementing the rules that will alert the compliance team to any breaches in the mandates that have been set by that firm. 

The bottom line is to protect the investor.  So although having the broker dealer rep act as a fiduciary may require additional supervision it is all in the investor’s best interest!  An advisor who is seen as the trusted advisor for their client gets more referrals and has better client retention. 

Disclosure:  The systems listed here do not represent a complete list nor do they represent a recommended list.

You might also be interested in:


You May Also Be Interested In:

FINRA Compliance Outlook and Best Practices [upcoming webinar]

15 Compliance Trends that Will Impact Your Practice in 2014 [white paper]

Following the fiduciary standard can translate into client retention and referrals [blog post]

comments powered by Disqus