B/D HOUSECLEANING 101
by Warren Forest
As our new year freshly unfolds before us, it is a perfect time to assess the past and plan for the future. By any measure, we have experienced a challenging year. The economy has taken its toll on virtually every business enterprise. Broker/Dealers and Investment Advisors certainly have seen their share of adversities.
Not only have business opportunities lessened as investors have fewer resources at their disposal, but the regulatory landscape has gotten bleaker. Both state and federal regulators are imposing more and more requirements such that the
“regulatory burden” is a very heavy load for financial service firms to carry.
One of the first things to do is decide whether to stay in the game, or not. Do we continue to suffer the slings and arrows of outrageous fortune, or take aim against the sea of troubles, and by opposing, end them?
Many times owners of financial service firms especially small companies, are surprised to learn their companies have value. All financial service firms, even dormant inactive ones have value. If you are contemplating closing your company, you may want to explore selling it first.
We have spoken to many people who were not aware that their Broker/Dealer had value, and was saleable, and filed a BDW (Broker/Dealer Withdrawal request.) And, while a BDW is a request to withdraw from FINRA membership, once it is submitted it CANNOT be withdrawn. We at Broker Dealer Place, Inc. are specialists at selling financial service companies. Before you decide to close your business, you may want to talk to us about assessing other options available to you.
If you decide to “take aim against a sea of troubles,” and persevere with your efforts, now is the best time to start the year off right with Broker/Dealer house cleaning. Annual audits for most companies will be due very soon. Make sure that you have a qualified PCAOB CPA firm preparing your audited financial statements.
One new development concerning audits is that FINRA is now requiring them to be submitted electronically. If you send a hard copy audit report to FINRA, it will not count as being submitted.
Take the time now to make sure you are set up for the electronic filing.
Review all of your documents such as Form BD, Form U-4′s, and FINRA contact information, and update your records as needed. Check your Customer New Account Forms for accuracy, and reach out to your customers. This can be a great marketing opportunity, and also ensure your customer records are all up-to-date, which is a regulatory requirement.
Your 3012 Certification, annual review of operations, branch office examinations, and AML audits should be completed, or in the process, for the prior year. Make sure you have updated all of your FINRA contact information electronically on Web CRD. If you are a small firm, you should make the “limited size and resource” notification to limit your heightened supervision obligations.
Minimum Fidelity Bond coverage increases this year. All B/D’s now must have at least a $100,000 Fidelity Bond in place. There is a hidden “kicker” as well. If you do not structure your deductable properly, you may find yourself surprised
with a charge to your net capital!
As the brokerage business becomes increasingly complex, your oversight is paramount. And, the beginning of the new year is a perfect time to start your house cleaning.
No one can be expected to do it all alone. If you have any questions, we at Broker Dealer Place, Inc. (407-774-2000), along with our sister company, Forest Brokerage Advisers, Inc. (407-696-9600) are here to help!
Posted by: editor January 15, 2012