More On Legal & Compliancefrom The Advisor's Professional Library
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
- Whistleblowers A whistleblower is any individual providing the SEC with original information related to a possible violation of federal securities law. The Dodd-Frank Act established a whistleblower program that enables the SEC to reward individuals who voluntarily provide such information.
I enjoy reading Bob Clark's articles. However, I was surprised to read something in the April issue's "The Dale Brown Gambit." That article said [referring to FSI's opposition to the Merrill Lynch rule], "But it's also pretty brave, considering that no independent B/D that I know of extends its supervision to the RIA portion of its reps' practices."
Securities America, Inc. is an independent B/D with more than 1,600 independent registered representatives nationwide. Of that number there are 1,181 who are also investment advisors. Of those investment advisors, 280 are their own independent RIA and 901 of them chose to come under Securities America's corporate RIA, Securities America Advisors.
Both the independents and the corporate RIA reps do a variety of investment advisory business tasks, including managing the assets themselves, using fee-based accounts, or outsourcing to third-party money managers. They also do a considerable amount of financial planning, some charging additional fees for the financial planning and some charging annual retainer fees. They can choose from a variety of platforms, including National Financial, Pershing, and Schwab. However, we as a firm are required to supervise the activity because they are also registered representatives and anytime a representative participates in the execution of a trade, we are obligated to supervise whether they are operating under their own RIA or not. Therefore, we assist our advisors with all types of support and supervision, from running their performance numbers and showing them how they compare against benchmarks to running risk reports compared to investment objectives stated on the accounts.
We receive feeds from all entities to "supervise that activity." We also do third- party money manager due diligence when they choose to use an outside third party to manage the assets and receive a portion of the fee for the "advice." In addition, we have a whole RIA compliance department that supports all of the necessary compliance requirements of independent RIAs, from writing and amending their Form ADVs, to helping them build their compliance manuals and draft and amend their client agreements, to making sure they comply with their annual ADV offer.
We also do training sessions for the independent RIAs to keep them abreast of all regulatory requirements.
Our understanding of our responsibility is that the B/D must supervise RIA activity even when the RIA is an independent because he or she is a registered rep of the B/D, and that is the feedback we have with most of the other independent B/Ds.
I guess I would be surprised if other independent B/Ds didn't have this type of supervision in place. In addition, because our errors and omissions insurance covers investment advisory activity including financial planning, we are obligated to supervise this activity from a risk management standpoint if we want to extend coverage.
Chief Marketing Officer
Securities America, Inc.
Easy to Understand
In regards to the April article "Special Needs," I have read many pieces on Special Needs Trusts that are filled with technical and confusing language. Your concise article was one of the most informative pieces that I have read to date. It was informative, to the point. and easy to understand, with ideas that will be simple to share and implement with my clients.
Thank you for taking the time to share your knowledge with me.
John M. Gaburo
Neptune, New Jersey