Some agents find that being in compliance with state and National Association of Securities Dealers regulations and company procedures is easy, while others find it difficult. Some agents find that in spite of their efforts, they keep making mistakes that result in audits, investigations or examinations by the companies with which they do business. These investigations usually amount to questions about what the agent did and his or her rationale for doing them that require written answers. They can create anxiety and be time-consuming.
Some agents repeatedly find they make compliance or market conduct mistakes that lead to warnings or sanctions when they are audited. Some agents, sadly, lose their contracts with the companies with which they do business and lose their NASD registration.
Why is it that some agents find complying with rules, regulations and procedures easy? Why do some agents never have a problem with compliance and market conduct? The answer may be that they have the right attitude toward it. The “psychology” of good compliance and market conduct is something that seems to differentiate between compliance being easy and hard to accomplish.
The following “psychological characteristics” can help an agent be in compliance and have appropriate market conduct.
A healthy paranoia
A healthy fear can be very motivating. It can help you avoid getting into dangerous situations. Agents who feel a little defensive about compliance and market conduct tend to be more cautious and reflective about what they do. A healthy paranoia about compliance issues makes an agent careful about what he or she says to clients. To avoid misunderstandings, these agents will often seek acknowledgement from clients about what they thought the agents said.
Some agents temper their trust and faith in clients and companies when it comes to compliance and market conduct. They often use signed disclosure forms so they are assured that if issues arise, they have proof that they provided the proper disclosure and followed regulations and procedures. Finally, when someone tells them something is OK, before doing it or using it, an agent with a healthy paranoia will check it out. For example, when told by a vendor that a selling system is in compliance, the agent checks with the companies he or she represents to make certain.
Compulsive about details
Agents who are compulsive about getting the details right when dealing with compliance and market conduct avoid creating problems for themselves. For example, checking and double checking that forms and procedures are completed properly and that steps in the sales process are done in the correct order can help avoid problems. Agents who have a set procedure and follow it scrupulously will avoid those little mistakes that can come back to haunt them. For example, an agent who develops a checklist for making sure that state and company replacement forms are completed correctly and uses that checklist every time he or she is working with a replacement will avoid making potentially serious mistakes.
Being compulsive about details also means the agent completes things, like training, far in advance of their due dates. Last minute rushing around often leads to potential problems.
Finally, agents who “sweat” the details have complete and well-organized files that make audits and examinations a much less anxiety-producing experience.
Anxious about mistakes
Anxiety and worry about making mistakes can have some very healthy side effects when dealing with compliance. Looking before you leap can help you from falling on your face. Agents who want to avoid the first and only mistake they make will double check forms, find out answers before taking action and get company direction before taking any risky actions. They know that in the area of compliance a small mistake often can lead to big problems. Forgetting to provide a prospectus may seem like a small issue, but when questions are raised, it can become a big problem for the agent and the company. Failing to follow up on a client’s questions may lead to a company complaint. Agents who are anxious about avoiding mistakes are motivated to take prompt action. When they make a potential mistake, they also take quick action to resolve it.
Resolute and self-confident
There are always people who will say that compliance and market conduct are not important and that spending time on them is a waste. Agents who are resolute and a little inflexible about avoiding problems will ignore this advice. The more confident you are about the importance of proper compliance and market conduct, the less likely you will be to take shortcuts that can lead to potential problems. There is nothing wrong with being flexible about improving and streamlining procedures, but it sometimes takes a stiff-necked attitude to avoid potentially risky approaches. Resolute agents persevere in doing the right thing even when it takes extra time and energy.
If you cultivate these “psychological characteristics” in moderation, they will help you avoid compliance and market conduct problems. You will have confidence you are doing the right thing in the right way and the courage to keep doing what you’re doing in spite of the extra attention and energy it requires.