The North American Securities Administrators Association (NASAA) released on Monday the results of its coordinated examinations of broker-dealers throughout the United States, identifying BDs’ top five compliance violations.
NASAA also recommended 10 best practices for broker-dealers to consider.
A total of 236 examinations conducted between Jan. 1 and June 30 found 453 types of violations in five compliance areas, NASAA said. The greatest frequency of violations (29%) involved books and records, followed by supervision (27%), sales practices (24%), registration and licensing (14%) and operations (6%).
About half (44%) of the examinations involved one-person branch offices; 23% were home offices; 20% were branch offices with two to five reps; 11% were branch offices with more than five reps; and 2% were non-branch offices.
Based on the exam results, NASAA recommended several best practices to help BDs improve compliance. Here are the top five categories of BD compliance violations, along with NASAA’s recommendations.
Top violation category No. 5: Internal audits
Branch office audits. Develop a branch audit program that includes a meaningful audit document/plan, unannounced visits, a means to convey audit results, and a follow-up plan requiring that the branch take corrective action.
Top violation category No. 4: Maintenance of customer account information
Customer complaints. Upon receipt of a complaint, firms must acknowledge the receipt, conduct and document a thorough review of the customer’s allegations, and, if necessary, update the broker’s Form U-4.
In situations where the firm discovers wrongdoing, the firm should redress customer harm. Timely reporting and remediating customer harm are some of the factors under NASAA guidelines to determine if the firm is entitled to credit for cooperation.
Top violation category No. 3: Correspondence/E-mail