Outside Business Activities Reviews, Approval and Monitoring Wednesday, November 11 3:30 p.m. 4:30 p.m.

Transcription

1 Outside Business Activities Reviews, Approval and Monitoring Wednesday, November 11 3:30 p.m. 4:30 p.m. Join industry practitioners and FINRA staff as they cover the key requirements of the outside business activities (OBA) rules. FINRA panelists discuss common OBA deficiencies found during examinations. Panelists share effective practices regarding policies and procedures for identifying, documenting and disclosing OBAs. Moderator: Panelists: Christopher LeVasseur Associate Director FINRA Los Angeles District Office Donald Runkle Regulatory Compliance Director Coordinated Capital Securities, Inc. Tammy Tam Principal Consultant ACA Compliance Group Elizabeth Wilson Executive Vice President and Chief Compliance Officer O Neil Securities, Inc Financial Industry Regulatory Authority, Inc. All rights reserved. 1

2 Outside Business Activities Reviews, Approval and Monitoring Panelist Bios: Moderator: Chris LeVasseur is the Associate Director of the FINRA Los Angeles District Office where he is responsible for managing the District Office s regulatory programs. Mr. LeVasseur has been with FINRA/NASD since 1996 and was previously an Examination Manager in the Los Angeles and San Francisco District Offices. Mr. LeVasseur is designated as a Certified Regulatory and Compliance Professional by the FINRA Institute. Mr. LeVasseur graduated with a Bachelor of Arts degree in Economics and Psychology from Lafayette College and a Masters of Business Administration degree from National University. Panelists: Don Runkle is the Regulatory Compliance Director for Coordinated Capital Securities, Inc. In his role with CCS, Mr. Runkle helps to ensure that the firm has appropriate processes and procedures to exceed all regulatory requirements and manage risks in an efficient and effective fashion. He also assists with the execution of all procedures as necessary, including support functions in examinations, regulatory inquiries, customer complaints, options activities, municipal bond activities, new and ongoing product reviews, suitability analyses, and general operational and compliance functions. Mr. Runkle also serves as the Director of Consulting Services at Edgerton and Weaver, LLC. Mr. Runkle works with the firm s staff to help broker-dealers, investment advisers, and registered representatives develop, implement, and execute strategies to mitigate or eliminate their litigation and regulatory risks. The combination of the firm s legal expertise, strong regulatory relationships, and extensive business experience makes the firm a unique "one stop shop" for clients. Prior to joining the Edgerton and Weaver, he was the Chief Compliance Officer for Raymond James Financial Services, Inc., in St. Petersburg, Florida. He has over 23 years of experience in the financial services industry, having worked as a financial advisor and in several compliance-related roles. Mr. Runkle has been an active leader in numerous industry associations and regulatory committees. He currently serves on the FINRA Membership Committee, and he was previously elected to two terms on the FINRA District 7 Committee. He has also served on the FINRA Regulatory Advisory Committee, the SIFMA Compliance and Regulatory Policy Committee, the FSI Compliance Council, and the SIFMA Compliance and Legal Society s Regional Firms Committee. Previous industry involvement also includes the FINRA Compliance Resources and Education Committee, the FINRA Books and Records Task Force, the NASD Licensing and Registrations Council, the SIFMA Self-Regulations and Supervisory Practices Committee, the SIFMA State Regulation and Legislation Committee, and the IAFP Compliance Advisory Council. He holds numerous industry licenses, including the Series 7, 24, 53, 4, 63, 65, and previously obtained the Florida Life and Health insurance license. He also completed the Securities Industry Institute at the University of Pennsylvania Wharton School in 2004, and he has been a FINRA arbitrator since Tammy Tam joined ACA in July 2014 as a Principal Consultant in the New York City office. Prior to joining ACA, Ms. Tam spent nine years at the FINRA Boston Office. She worked as a Senior Compliance Examiner until 2006, when she became a Regulatory Principal and then a Principal Examiner. During her time at FINRA, Ms. Tam led or managed examinations that included investment banking, investment management, research and trading firms. Ms. Tam is experienced with FINRA, MSRB and SEC rules that apply to broker-dealer activities. Ms. Tam earned a B.A. in Economics and a B.A. in International Relations from Boston University. She is also a Certified Financial Services Auditor, IIA ( CFSA ) and holds a Graduate Certificate in Forensic Accounting from Northeastern University. She currently is an active Certified Anti-Money Laundering Specialist (CAMS) Financial Industry Regulatory Authority, Inc. All rights reserved. 2

3 Elizabeth Wilson, is the EVP, Chief Compliance Officer for O Neil Securities, Inc. Servicing the investment community since 1963, O'Neil Securities provides trading services to institutional clients, including pension and mutual funds, hedge funds, banks, insurance companies, and corporations. In her role as CCO since 1998, Ms. Wilson s responsibilities include overarching elements like WSPs and facilitating all regulatory examinations and responses, reports, filings and record keeping; business function elements such as registrations and licensing, regular oversight as well as trend analysis, and; associate interaction elements such as procedural review for policy updates, annual training, and critical initial orientation meetings with each new hire to ensure proper understanding of the compliance perspective of the firm as well as coverage and acknowledgment of compliance policies. Prior to joining O Neil Securities, Ms. Wilson was a Senior Compliance Examiner for Prudential Securities, traveling throughout the US conducting branch office inspections and often providing annual compliance meetings for the branch during the review. Training of new examiners was a significant part of her role over her tenure starting in Ms. Wilson entered the financial services industry in 1992 as a New Accounts/Compliance Supervisor at Kidder Peabody. She received both her master s and bachelor s degrees in Business Economics from University of California at Santa Barbara Financial Industry Regulatory Authority, Inc. All rights reserved. 3

4 Small Firm Conference November 11-12, 2015 Santa Monica, CA Outside Business Activities: Reviews, Approval and Monitoring

5 Panelists Moderator: Christopher LeVasseur, Associate Director, FINRA Los Angeles District Office Panelists: Donald Runkle, Regulatory Compliance Director, Coordinated Capital Securities, Inc. Tammy Tam, Principal Consultant, ACA Compliance Group Elizabeth Wilson, Executive Vice President and Chief Compliance Officer, O Neil Securities, Inc. 1

6 What is an Outside Business Activity (OBA)? FINRA Rule 3270 Business activity outside the scope of the relationship with his or her member firm Details on rule requirements Employee, independent contractor, sole proprietor, officer, director or partner of another person Receive compensation, or Reasonable expectation of compensation 2

7 What is an Outside Business Activity (OBA)? (Cont.) Considerations Activity does not interfere with registered person s responsibilities to the member Activity should not be viewed by customers or the public as part of the member s business Complications Sports coach compensation vs. voluntary Owner of a company the company offers financial-like services (e.g. accounting, retirement planning) Member of a Board company was non-public, now decides to do an IPO What happens when the scope of the OBA changes? 3

8 Basic Procedures for OBA Representatives must provide prior written notice to the firm The firm should review the activities of the OBA and either provide approval or rejection Records must be kept evidencing the firm s consideration of conflicts and approval/rejection of activity 4

9 Additional considerations involving OBAs Firm s risk tolerance for OBAs New employees Client disclosure Representatives soliciting firm clients for outside business Independent contractor model vs. affiliated entities model Ongoing monitoring Branch inspections Form filings 5

10 Mitigating Conflicts Reject the OBA How is that documented Do we request acknowledgment in writing? Placing limitations on the activity How do you determine the limitations? How much monitoring is needed? 6

11 OBA vs. Private Securities Transactions (PST) What is a PST FINRA Rule 3280 any securities transaction outside the regular course or scope of an associated person s employment with a member, including, though not limited to, new offerings of securities which are not registered with the Commission PST can be grouped into two categories Transactions in which an associated person is selling securities to public investors on behalf of another party Transactions in securities owned by the associated person A review of OBA can involve a review of PST How to determine if a reported OBA is a PST What to do if the activity is a PST 7