SIA Defends Need For Consumer Rule Compliance Etension

“We understand that some organizations have questioned the brokerage industry’s need for an extension, but we cannot stress enough that an extension is necessary to allow firms to appropriately implement and comply with these aspects of the new rule,” Hammerman writes.

Firms affected by the new rule must review a great deal of information, including detailed information about huge numbers of customer accounts, to determine which accounts fall under the umbrella of the new rules, Hammerman writes.

“Most of our large member firms have scores of investment materials and reports that registered representatives use to service client accounts,” Hammerman writes. “In many, if not most instances, these materials and reports are made available to representatives in dispersed branches on an automated basis. Firms must review each of the material and reports to determine whether the related service is brokerage or investment advisory, and must draft disclosures based on the nature of service.”

On the issue of discretionary brokerage accounts, Hammerman notes that deciding which accounts fall under the Investment Advisers Act is merely the beginning of a long compliance process.

“For clients that determine to maintain discretionary accounts subject to the Advisers Act, firms will need to create and finalize investment advisory agreements, ADV filings and related advisory program client disclosures, internal policies and procedures, and most importantly, internal systems infrastructure and trade processing that are necessary to ensure that these accounts comply with the requirements of the Advisers Act,” Hammerman writes.