From the June 2004 issue of Investment Advisor • Subscribe!

June 1, 2004

Screening Process

Reps interested in moving to another B/D should consider compliance when they make their choices. Dennis Kaminski, chief compliance officer at Mutual Service Corp., suggests reps consider the following factors:

1The B/D's excess net capital

2.The B/D's CRD record

3.The principal's CRD record

4.Meet with reps from the larger producing offices

5.Determine the products the B/D sells, and the percentage of total revenues they represent

6.Determine the number of support people the B/D has

7.Determine the backup systems the B/D uses

8.Review copies of the B/D's certified annual audit

9.Determine how many open lawsuits or arbitrations the B/D has

10.Determine how many staff people are in operations, compliance, and technology, to judge whether staffing is sufficient to service the B/D's total rep base

11.Talk to its competition

12.Determine if the firm is actively involved in industry organizations such as the SIA, FSI, or NASD

13.Determine how long the firm has been in business

Problems to look out for:

oRevenues in concentrated levels in one or two product areas, e.g., low-priced stocks, all variable annuities, IPOs, etc.

o Officers tend to be evasive when you ask questions

oIs payout totally out of proportion compared to the competition?

oHigh rep turnover

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