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Dear Reader

Dear Reader

July 4, 2014
Anniversary Letter
By Gox, By Golly. ~ It's time for compliance and folly.
Bitcoins and Mt. Gox are headline news. But the focus of this year's annual state of the industry letter is not on the virtual currency. You now have in your hand a physical Bit Coin (not one that disappears into thin air), to be your daily reminder to do your bit to stay in compliance.
Here are the highlights of regulatory events from the last twelve months and my bit of advice to help you comply.
"I can't deny the fact that you like me, right now, you like me," so said Sally Field upon accepting her 1985 Oscar. One year ago the SEC weighed in that the use of your friends' (ergo clients or prospective clients purporting to be your friends) use of the "like" feature on social media could be deemed to be a prohibited testimonial. One year later, the SEC now says that in "certain circumstances" an RIA's (or IA Rep's) publication of all of the testimonials from an independent social media site would not implicate the concern underlying the testimonial rule. For now, your friends can like you... but not before you put your social media Policies and Procedures ("P&P") in place.
The RIA custody rule as amended and effective 2010 continues to be a source of non-compliance and a focus of the regulators. You may unwittingly have access to client funds and securities based on authorities granted to you by your clients. Take a look at the abilities to transfer funds from client accounts and make address changes. Do you have access to client accounts via their private passwords? Here is another area of your P&P that you want to give your attention.
Regardless of your size (big or small), you may be subject to someone trying to impersonate your client and transfer money to illegal hands. That is why you were required to create your Identity Theft Prevention Program ("ITPP") by November 2013. Can you identify and detect red flags so that you can respond appropriately, thus preventing the fraud? Have you documented such safeguards in your ITPP?
As hurricanes and other disasters continue to make the news, the SEC, FINRA and a CFTC division issued a joint staff advisory on Business Continuity Planning ("BCP"). If needed on short notice, can you continue your operations from an alternate location? Do you know in advance how to contact and deploy employees during a crisis? Have you evaluated the BCP of your critical service providers? Have you dusted off your BCP since first drafting for a review? Have you tested your computer systems for recovery during a crisis... even those cloud-based solutions? Will your BCP weather a storm?
FINRA is seeking comments on regulatory review of broker/dealer rules to ensure they are current and modern. It has taken so long to consolidate the NYSE/NASD rules (still not complete) that the rules may already be dated! FINRA has backed away (once again) from its attempts to be the Self-Regulatory Organization ("SRO") for the investment advisory industry. Maybe by the time FINRA finally completes the consolidated broker/dealer rules they will once again start the campaign to regulate advisors.
Through the SEC's 2013 Compliance Initiative, the regulator wants to know that firms and their compliance officers have the necessary resources and training to navigate the complex and rapidly changing markets. Do you have the tools to test for, detect and address compliance failures? Are you empowered by your firm to do what you need to do?
Don't rely on a toss of the coin to determine if you have a winning or losing strategy.
There are resources to help you do your bit to comply:

  • CompliancE-Post: A free monthly e-mail service with brief postings of what's the hot industry buzz.
  • CompliancE-News: The executive summary of all the news that made the news. Annual subscription 12 monthly e-mail issues.
  • CompliancE-Alert: A value-added subscription service (which also includes the CompliancE-News) - provides timely alerts when news hits, and newly published research and forms.

If you are starting out or in need of a refresher, check out Go to CEO! How to Start Your Investment Advisory Firm - available as an e-book.
Additional compliance resources... If you are a do-it-yourself type person, I offer an array of products (P&P, BCP, ITPP, and more) that are both educational and easily customizable to your practice. Click here for a complete list.
If you want to increase your odds of success, call or email me for consulting services. I work with a limited number of clients under annual retainer. I generally keep a full client load. However, I do take on new clients from time to time, so keep those inquiries and referrals coming.
RIA Fast Track Program is a new service offering. The Fast Track includes compliance resources and consultations to get your operations up and running. Designed as a start-up service for new RIA firms, it is a part do-it-yourself and part "Ask the Expert" solution. If you are creating a new RIA, call for details.
Do your bit to comply!
Nancy Lininger
Nancy Lininger
July 4th marks 25 years since I gained my independence as a compliance consultant, lifting the burden of compliance for you.
To collect your Bit Coin, please e-mail me at:

Nancy Lininger

Nancy Lininger
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