CRP provides a broad range of compliance and regulatory services to the Broker/Dealer community. Our clients have found that outsourcing certain aspects of the compliance function is a cost effective strategy that provides access to qualified experts when needed.
Whether you are starting a new firm or you have an existing firm needing a mock regulatory exam, assistance with branch audits, new supervisory procedures, a continuing membership application or assistance with FOCUS Reports, state licensing or CRD registrations, you can be confident CRP will be up-to-date on the relevant issues related to Broker/Dealer compliance.
CRP offers the following ongoing compliance consulting services for Broker/Dealers. We will coordinate a flexible compliance program to meet the needs of your firm.
CRP’s Consulting Services:
- Written Supervisory Procedures
- Supervisory Controls (3012-3013) Procedures and Consulting
- AML Programs & Audits
- Full Service B/D Registration
- Continuance in Membership Application (Rule1017)
- Branch Office Audits
- NASD Mock Examinations
- State Registrations and Licensing
- FinOP & FOCUS Consulting
- Compliance Meetings
- CE Needs Assessment & Training
- Respond to regulatory inquiries (e.g. SEC and FINRA deficiency letters)
Written Procedures (Model)
Our Model Procedure Manuals are continually analyzed and updated as a result of regulatory reviews and changes in industry practices and technology. Due to our frequent interaction with the SEC, FINRA and state regulatory bodies, CRP’s procedures cover the latest regulatory initiatives.
Our model procedures include specific manuals for each of the following:
- Written Supervisory Policies and Procedures
- Written Supervisory Control Policies and Procedures (NASD Rule 3012 and 3013)
Our model procedures are designed to provide guidance to firms who are developing new procedures or modifying existing procedures. Firms should not adopt “off the shelf” procedures without substantial modifications to conform to the firm’s business activities and operations.
Written Procedures (Customized)
CRP will customize the Model Policies and Procedures to meet the specific needs of each client.
We will also review and update your current supervisory and compliance procedures, upon request.
NASD Rules 3012 and 3013, along with amended NASD Rule 3010, set forth the current requirements for a supervisory system. CRP is an expert in instructing you relative to adopting and implementing the proper supervisory procedures for your company.
- Rule 3013 requires the CEO to certify that the firm has a process to adopt adequate Supervisory Policies and Procedures
- Rule 3010 requires the establishment of a supervisory system and implementation of adequate written supervisory policies and procedures
- Rule 3012 requires each firm to test and verify supervisory procedures and, if necessary, to amend policies and procedures
Minimum Requirements for a Supervisory System and Procedures are discussed in NTM 99-45. These requirements include:
- Written Supervisory Procedures reasonably designed to achieve compliance with all applicable laws and regulations
- Designating Qualifications of Principals Responsible for Supervision
- Designating Offices of Supervisory Jurisdiction
- Annual Compliance Meeting
- Review of Supervisory Procedures on a regular basis
- Annual Inspection
More detail on FINRA expectations regarding supervisory procedures is found in FINRA’s Written Supervisory Procedures Review Checklist. Although this list is not to be considered a “safe harbor” or all inclusive, guidance is provided on what areas FINRA examiners are currently reviewing.
For years, under NASD Rule 3010 and NYSE Rule 342, Broker/Dealers have been required to have supervisory systems and written supervisory procedures in place that are reasonably designed to ensure compliance with applicable rules and regulations. However, newly adopted NASD Rules 3012 and 3013 and amended NYSE Rule 342 have raised the bar on regulatory expectations regarding supervisory and compliance systems. NASD Rule 3013 requires every CEO of a Broker/Dealer to certify that the Broker/Dealer maintains a process to establish, maintain, review, test and modify written compliance and supervisory procedures.
Rule 3013 also requires that a written report be prepared and reviewed by the CEO, CCO and other appropriate officers prior to executing the certification. The report should include the manner and frequency in which the processes are administered, as well as the identification of officers and supervisors who have responsibility for such administration. The CEO and CCO are required to have at least one meeting annually to discuss the findings of the report.
NASD Rule 3012 requires that your firm had identified one or more principals who had established, maintained and enforced a system of supervisory control policies and procedures that test and verify that the firm’s supervisory procedures are reasonably designed to comply with applicable securities laws and NASD rules and amend those procedures when necessary. The identified principal(s) must submit to senior management, no less than annually, a report detailing the firm’s system of supervisory controls, a summary of test results, significant identified exceptions and any additional or amended supervisory procedures created in response to the test results. Rule 3012 also contains specific requirements for supervision of producing managers and supervisory controls for transmittal of customer funds, change of address and changes in customer’s objectives.
CRP’s Supervisory Control Program
CRP assists firms in complying with the rules. Our program is based on feedback from FINRA regarding expectations for program implementation:
- Develop a list of business activities and applicable rules, regulations and internal controls for each activity;
- Conduct a “gap analysis” of your current supervisory procedures by assessing whether your procedures adequately address all applicable rules, regulations and internal policies and controls for each business activity;
- Develop new or modified procedures where material gaps in the current procedures exist;
- Develop and implement a verification and testing plan for the firm’s procedures;
- Develop a reporting model to meet the requirements of Rule 3012 and 3013; and
- Create a model that may be used to support the CEO certification and reporting requirements in future years.
AML Programs (Model or Customized)
CRP has developed a comprehensive program to assist clients in meeting their AML responsibilities, to include:
- A Customer Identification Program
- A sample AML policy statement
- Written supervisory procedures and red flags to assist in monitoring activity and opening accounts.
NASD AML Rule 3011 requires that member firms provide for an independent testing function to review and assess the adequacy of and level of compliance with the firm’s AML compliance program. “The rule will allow for either internal testing by qualified personnel or the use of a qualified outside party. If a firm uses internal personnel, sufficient separation of functions should be maintained to ensure the independence of the internal testing personnel. The independent testing should be performed annually. After a test is complete, the auditor should report findings to senior management or to an internal audit committee, as appropriate. The firm must ensure that there are procedures for implementation of the auditor’s recommendations and corrective or disciplinary action as the case may warrant.”
If your firm does not have a sufficient number of qualified internal personnel to maintain separation of functions so that the individual(s) testing the AML program are not involved in monitoring day-to-day AML compliance, you may need to hire an outside firm to conduct your annual audit. If you feel you have adequate personnel it may be more cost effective to conduct the testing internally.
CRP can either conduct the audit or train your internal audit staff.
CRP has fifteen years of experience assisting firms through the NASD/FINRA membership process. The regulatory and industry experience offered by CRP can reduce the risk of delayed or abandoned registrations, additional work delays and costly legal issues.
The cornerstone of a firm’s compliance program is an effective set of supervisory and compliance procedures and supervisory control procedures that are reasonably designed to achieve compliance with all applicable securities laws, regulations and rules of FINRA. We take the time to understand the firm’s business plan and prepare policies and procedures that address each firm’s unique compliance issues.
CRP will prepare and file all required documents for Broker Dealer registration with the SEC, FINRA, MSRB and State Jurisdictions. These documents include the following:
- Form BD (Broker/Dealer Application Form) and all applicable schedules
- Form U-4 and fingerprint cards for each Registered Principal and Representative
- New Member Assessment Report
- Written Supervisory and Compliance Procedures
- Written Supervisory Control Procedures (Required under new Rules 3012 and 3013)
- Written Supervisory Procedures and Completed FINRA Procedures Checklist
- Assistance with the Business Plan
- Financial Statements and Net Capital Computation
- Description of Financial Controls, Communications and Operational systems
- Description of all Supervisors and Principals
- Description of Record-Keeping System
- Description and Documentation of the Nature and Source of Capital
- Continuing Education Needs Assessment and Training Plan
- Business Continuity Plan
- Anti-Money Laundering Program
- State and MSRB Registration Applications
- Fidelity Bond Application
- Description of Number, Experience, and Qualifications of Principals
- Description of Legal and Regulatory Actions Against any Associated Person
- Web CRD Entitlement Forms
- Provide Compliance Training to the Principals and Staff during the Application Period
- Additional Information Requested by FINRA following the initial filing and
- Additional Registration Requirements (i.e., FINS number, SIC agreement, SIPC Membership, MSRB Registration)
Change of Control / Change of Business Activities or Product Mix
FINRA member firms planning to implement changes in Ownership, Control or Operations and firms wanting to remove or modify restrictions placed on them by FINRA must file an application pursuant to NASD Membership Rule 1017. These filings can be quite extensive and may include a business plan, amended supervisory procedures, organizational charts and a continuing membership interview with the FINRA District Office. In addition, Rule 1017 sets forth strict time frames for filing requested information with the District Office. CRP offers experienced personnel to prepare these filings and act as the liaison with FINRA staff during the approval process.
Firm or agent registration in a state can be very complicated and time-consuming. Each state offers written instructions on its individual registration process; however, the CRP registration staff is familiar with the “unwritten” preferences of many states that allow the registration process to be completed faster and more efficiently. CRP not only prepares and submits a state registration package, but also monitors the progress of each state filing until the registration becomes “APPROVED.”
WebCRD and Representative Registration
Clients may outsource the entire Web CRD function to CRP staff. We will file all new U-4’s, U-5’s, BR’s and amendments to Form BD, U-4 and U-5, and also file 3070 Complaint and Disclosure filings. CRP provides a Web CRD monitoring system for those firms who wish to use their internal staff resources more efficiently.
CRP evaluates each firm’s business and determines the frequency of monitoring needed to keep the firm in compliance. CRP will supervise all areas of CRD and notify the firm of deficiencies, renewals, upcoming continuing education requirements and provide the firm with Supervision Reports. We are also available for consultation for any Web CRD filings, DRP reporting and 3070 Complaint and Disclosure Filings. By outsourcing daily, weekly or bi-weekly monitoring to CRP, a firm can save vast amounts of time and avoid unexpected and unnecessary violations.
CRP’s FinOp Consulting Service is focused on providing relief to the Financial and Operations Principal who may wear several hats and/or has limited practical experience. The time consuming process of preparing monthly financial statements, net capital computations and filing monthly and/or quarterly FOCUS Reports can significantly reduce time available for revenue producing or compliance activities. Furthermore, the FinOp must stay current on any rule changes or new interpretations that may affect a Firm’s net capital position and ultimately its ability to conduct certain types of securities business.
CRP’s FinOp Consulting Services include the following:
- Full general ledger function
- Review financial statements, prepare net capital computation and file FOCUS report
- Participate in annual financial audit and FINRA/SEC examination
- Advise clients regarding changes in the Financial Responsibility Rules
- Advise clients as to the net capital impact of proposed transactions
- Assist firms in locating a qualified Financial and Operations Principal and/or bookkeeper