2014 NSCP NATIONAL CONFERENCE Dual Registrant Challenges 1 Dual Registrant Challenges • Diane Novak, CCO Investment Services Corp. • Kurt Nunez, Core Compliance & Legal Services, Inc. • Z. Jane Riley, The Leaders Group, Inc./TLG Advisors, Inc. 2 Dual Registrant Challenges The Struggles when doing Both Separate entities or not? Advantages 1. Legal protection 2.Regulatory protection 3.Other advantages Disadvantages 1. More paperwork 2.More expenses 3.Other disadvantages 3 Staffing issues Dual Registrant Challenges The Struggles when doing Both a. Cultural Considerations b. Transitioning from Transactional to the Fiduciary Mindset c. Principal transactions/Best Execution 4 Dual Registrant Challenges The Struggles When Doing Both Reporting lines i. Compliance officers ii. Supervisors 5 Dual Registrant Challenges The Struggles when doing Both Compliance challenges a.Written Supervisory Procedures b.Code of Ethics c.Office Inspections 6 Dual Registrant Challenges Operational Issues Registrations i. Form BD ii.Form ADV and brochures iii.IARD iv.CRD v.SEC vs State vi.Who manages this alphabet soup? 7 Dual Registrant Challenges Operational Issues Operational Issues a.Information barriers may be needed b.Books and records considerations i.3 years, 5 years or 6 years c.Fee payments versus commission payments d.CRD accounting e.Trading issues 8 f. Custody issues Dual Registrant Challenges State Notice Filings (or Registration) a. Notice Filing (the Five Client Standard) b. The Exceptions (States with dissimilar filing rules) 9 Dual Registrant Challenges Rule Differences Rules a.Can I versus Should I – Prescriptive or principled b.Testimonials Conflicts of interest a.Let me count the ways… Managing Examinations 10 Resources Dual Registrant Challenges Rule Differences 11 a. Anti-Money Laundering/OFAC b. Advertising Rules and Submissions Dual Registrant Challenges Rule Differences Fiduciary Standard versus Suitability Standard i. Does the fiduciary responsibility end when product is sold ii.Supervising fiduciary responsibility AND sales suitability 12 Dual Registrant Challenges Dealing with Regulatory Examinations and Jurisdiction Issues Jurisdictional issues i.FINRA ii.SEC iii.State securities divisions Crossing the lines 13
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