A securities corporation in California was recently censured and fined for a variety of violations related to their WSPs.
“Representatives were able to maintain business-related pages on a social media site that had not been preapproved by a qualified registered principal. As a result of the firm not reasonably monitoring for usage of undisclosed websites, it failed to preapprove websites operated by representatives as required by its WSPs.”
The Securities Corporation’s WSPs required that the firm conduct a weekly review of registered representatives' social media sites that had been disclosed to the firm. Notwithstanding the firm's WSPs, this firm failed to conduct such a review 22 times out of a sample of 26 weeks reviewed by FINRA.
Additionally, during this audit period, the firm's WSPs required that a registered representative receive preapproval for a webpage on a business-related social media site. Because the firm did not have a reasonable system to monitor for compliance with its social media policies. 38 registered representatives were able to maintain business-related webpages on a social media site that had not been preapproved by a qualified registered principal. Additionally, because the firm did not reasonably monitor for usage of undisclosed websites, the firm failed to preapprove four websites operated by registered representatives as required by the firm's WSPs.
It can become very time consuming for a CCO to manually perform weekly reviews on advisors' websites and online presence. Automation is the key to any compliance program and that is where SiteQuest Compliance is able to assist you on a variety of fronts.
We often hear from CCOs Eagle Eye uncovers undisclosed social media accounts.
How are you to supervise these accounts when you don’t even know about them in the first place?
That is where our Eagle Eye application comes in to support your internet supervision methods. With “Eagle Eyes”, our application will help you search, discover, and document your advisors’ online presence. This includes undisclosed social media accounts, websites, blogs, and more. With customizable workflows this application will help you approve, or flag for further review each discovery.
This firm was also cited and fined for failing to monitor websites, and for not pre-approving websites operated by their representatives. SiteQuest Compliance brings you years of experience when it comes to web crawling, monitoring, archiving, and website analysis with our SQWatcher application.
SQWatcher can monitor websites hosted on your network, or an outside hosting systems. We would love to personally demonstrate how our applications will support and enhance your supervision processes.
Let us show you how it is done. Schedule your personalized demo today.
Source: (FINRA Case #2015047824201)
Are you ready for the February 1, 2020 implementation deadline?
In 2019, the New York Department of Financial Services (DFS) announced an amendment to the “New York Insurance Regulation 187” that affects annuities and life insurance sales.
“It requires insurers to establish standards and procedures to supervise recommendations by agents and brokers to consumers with respect to life insurance policies and annuity contracts issued in New York State so that any transaction with respect to those policies is in the best interest of the consumer and appropriately addresses the insurance needs and financial objectives of the consumer at the time of the transaction.” (DFS Press Release)
What does this mean for compliance supervisors? For firms issuing annuities, they must now do an online review for names and titles used by the registered representative that are selling their products in the State of New York.
“An insurer shall establish, maintain, and audit a system of supervision that is reasonably designed to achieve the insurer’s and producers’ compliance with this policy.” (Section 224.6)
Eagle Eye is already the partner of choice for many firms when it comes to supervising a registered representative’s online presence. With this updated rule, those utilizing our Eagle Eye application have a tool in place that monitors for this new regulation.
Consider partnering with Eagle Eye. For 10 years, SiteQuest Compliance is a trusted supervision and compliance partner. Let us show you how our application will save you time while streamlining your supervision processes and automatically documenting and reporting on your findings.
Contact us today to schedule your personalized demo.
Ten years ago, SiteQuest Technologies was created with the mission to make compliance supervision easier and more efficient by providing user-friendly applications to help financial firms stay compliant in the ever-changing digital world. Working side-by-side, truly listening to what our customers need and want, and developing solutions to meet those needs is still is our focus today.
With our customers in mind, we are excited to announce that SiteQuest Technologies is updating its name to SiteQuest Compliance. As rules and regulations evolve, our customers’ challenges are ever-increasing. From workflows to policies, to website monitoring and archiving, to internet supervision, to discovering undisclosed OBAs and social media accounts, our suite of compliance solutions provide financial firms with the tools they need.
While our name has changed, our values have not. As a company, and as individuals, we value integrity, honesty, continual improvement, and innovation. We are committed to our customers and work with them as partners, to be an industry leader in compliance applications.
Our SiteQuest Compliance team brings many years of experience in this industry. We know the challenges compliance and supervision brings, and we look forward to many more years of serving our great customers and partners.
In alignment with the adoption of a new name, SiteQuest Compliance has launched a new website at SQCOMPLIANCE.COM.
Thank you for visiting our new website. Take a moment and look around. Contact us to see how our applications will assist you with your everyday compliance needs and challenges.
President & CEO
A securities firm and its chief compliance officer were fined $225,000 by FINRA and required to retain an expert to evaluate and approve its written supervisory procedures (WSPs).
** We would like to note that the actions of this CCO are not the norm. This person committed many willful violations which led to this fine. But, many of the violations were in direct relation to supervision. SiteQuest Compliance provides solutions to CCO in regards to internet and website supervision. That is the primary focus of our article review.
“The NAC found that this securities firm and the CCO violated NASD Rules 3010 and 2110 and FINRA Rule 2010 by failing to establish and maintain an effective supervisory system, including written supervisory procedures (“WSPs”)… The firm then failed to implement a supervisory system to reasonably ensure appropriate review and supervision of the websites.”
NASD Rule 3010 required that FINRA member firms have reasonable supervisory procedures. The CCO in this case was responsible for reviewing and drafting the firm’s WSPs, and the WSPs provided that all advertising would be reviewed for misleading or inaccurate statements and that the firm’s president, would do so. The firm’s WSPs also specified that “all business messages on the internet shall be considered advertising.” And NASD Rule 2210 defined “advertisements” to include “any material . . . that is published, or used in any electronic . . . public media, including any website.” The NAC faulted the CCO for not “identifying” in the WSPs that “websites are advertising to be reviewed”; its rationale for holding the CCO liable when “the firm’s procedures did not specifically state that websites were advertising.” One registered advisor for this securities firm created two non-password-protected, publicly available websites. This firm and the CCO didn’t ensure appropriate review and supervision of these websites as advertising.
In the end, the NEC found that the firm’s failure to supervise the websites violated NASD Rules 3010 and 2110 and FINRA Rule 2010.
Our SQWatcher application would have been a great resource and support for this securities firm. SQWatcher is a web-based solution that TRACKS, MONITORS, and DOCUMENTS your websites assisting with your compliance. With SQWatcher, you have a partner that is built to support your firm, knowing that your required websites are being monitored and archived with tools that will alert you if there is a problem. With an easy to use interface, we will personally support you through the implementation and learning process, continually ongoing to ensure that you and your firm are getting the most out of this industry-leading application.
The NEC stated that “We reiterate here that compliance officers “play a vital role in our regulatory framework. That role in many instances has increased in complexity, and there are circumstances where the role presents difficult challenges. In making determinations about CCO liability, the protection of investors and the public interest are at the forefront of our minds.”
SiteQuest Compliance has over 15 years of industry experience supporting CCOs with their ever changing and increasingly complex job requirements.
Every day, thousands of advisors and advisor websites are being monitored and documented with the aid of our industry-leading compliance and supervision applications. We are proud to be a partner in compliance. We would love to discuss your compliance concerns. Contact us today!
Source: (FINRA Case #2011027666902)
After attending the May 2019 Annual FINRA Conference it is still evident that High-Risk Brokers are still a priority and an area of ongoing concern for FINRA. During this conference, we attended an informative break-out session with a discussion panel focusing on heightened supervision and Regulatory Notice 18-15.
It was right before last year’s annual conference that FINRA released its Regulatory Notice 18-15 regarding Heightened Supervision. FINRA noted that there are times where heightened supervision of an advisor may be appropriate. This notice stated that “FINRA requires member firms to establish and maintain supervisory systems for each of their associated persons and to test and verify annually that they have established reasonable procedures, including procedures for heightened supervision of associated persons, where necessary.”
This year’s discussion panel noted that FINRA is still looking for:
FINRA is also stressing this year that you examine these issues and identify “high-risk” brokers during the hiring process.
FINRA's 2019 Risk Monitoring and Examination Priorities Letter stated in regards to high-risk brokers that, “we will continue to enhance our examination program to evaluate how firms address these risks in their hiring practices and supervision programs.”
Innovative regulatory technology is playing a more prominent role for supervisors in their efforts to become more efficient, effective and risk-based in their supervision methods.
With our Eagle Eye application’s risk-based approach your workflow processes will get easier, faster, and more effective. With increased system intelligence, enhanced lexicon capabilities, system learning, and detailed evaluation of results content, Eagle Eye automatically discovers your riskiest advisors and focuses your attention to where it’s needed.
Our Eagle Eye’s innovative “Heighten Supervision Mode”. The flexibility of this application empowers you to monitor your advisors at a variety of levels. For those that push the envelope a heightened level of supervision may be required. Eagle Eye will dig deep and with “Eagle Eye” precision discover and notify you of your advisors’ online presence.
Eagle Eye allows you to customize your supervisory approach without worry, and without additional charges or fees. Contact us today for your personalized demo and we will show you how our “Heightened Supervision Mode” will benefit your firm.
Are you concerned that you might have unidentified “high-risk” brokers at your firm? Have you identified a “high-risk” broker, but are unsure what to do next? Are you documenting this whole process and what you find? Let us help you address any concerns you might have. Contact us today.
During 2018, Eagle Eye celebrated its 5th year as one of our premier applications. Our first ever Eagle Eye client still utilizes this product and loves the ease and convenience of this program. More and more clients are discovering Eagle Eye and adding it to their firm’s resources.
Outside OBAs and unauthorized content from your representatives or advisors are a growing concern that will always be present. We have been paying close attention and analyzing these trends discovered by Eagle Eye.
During 2018 we implemented the new Risk-Based Reviews feature to our Eagle Eye application. With added system intelligence, enhanced lexicon capabilities, system learning, and detailed evaluation of results content, Eagle Eye automatically discovers your riskiest advisors and focuses your attention to where it’s needed. Learn more about this new feature.
Eagle Eye can assist you in discovering and managing risks, increase your reviewer productivity, while streamline compliance.
We look forward to increased client interactions and helping with the challenges that a new year brings. Thank you for being a part of this great growth.
The best place to hide a dead body is page 2 of Google search results
How often to you look at page two when you search for something on the web?
Statistics have shown that as many as 91% of "Googlers" never go past the first page of Google when performing a search. With stats like that, page two or beyond can be a great place to hide, and considering the size of the web, an advisor's web presence can be easily buried deep in the search results presented by Bing or Google.
Case in point. If you were to search for my name, "James Cella", just one of the top ten results (page one of Google) are positive hits for me.
Those are the other "James Cella's" in this world. You know, the one that's a hollywood producer, a singer in Europe, and a lawyer in New York. Yeah, those guys.
So maybe the saying is true. You can hide a dead body on page 2 of Google.
On the flip side, Eagle Eye correctly identified me (James Cella) correctly ten out of the first ten results found by system. That's 100% accuracy in this case and a huge improvement on Google's 10% accuracy mentioned above. If you wanted to go even deeper, every result in the top 30 result is a positive hit for me in Eagle Eye and if you were to look at the top 50, only 4 results were false positives. Those are staggering numbers compared to what we have found on Google or Bing.
So even though one can hide a dead body or more realistically an outside business activity, an undisclosed social media account, website or blog on page two (or beyond) on Google, one can't easily hide them from Eagle Eye.
What controls does your firm have in place to aid you in discovering DBAs if your advisors are not disclosing them?
In December 2018, FINRA released their annual “Report on Examination Findings”. This report serves as a resource for firms to strengthen their compliance programs and supervisory controls. This report focuses on selected observations from recent examinations that FINRA considers worth highlighting because of their potential significance, frequency, and impact on investors and the markets.
“FINRA’s examination, surveillance and risk monitoring programs play a central role in supporting FINRA’s mission of investor protection and market integrity.”
“DBAs and Communications With the Public” were one of the findings highlighted in this report. FINRA continues to find that many registered representatives are not compliant with FINRA Rule 3270 in trying to conceal their outside business activities.
“FINRA observed that certain firms did not maintain sufficient WSPs and controls, or provide adequate disclosures regarding the use of DBA names.”
What controls does your firm have in place to aid you in discovering these DBAs if your advisors are not disclosing them? How do you know what your advisors are putting online using their “DBA” name? That is where our Eagle Eye application steps in. Our multi-query processes and dynamically designed algorithms provide more accurate online search results for you to quickly review. Our new “Risk-Based Review Process” provides added system intelligence, enhanced lexicon capabilities, system learning, and detailed evaluation of your search results. Eagle Eye automatically discovers your riskiest advisors and focuses your attention to where it’s needed.
FINRA’s exam report also focused on registered representatives’ use of DBA names on their websites, social media accounts, seminars, and more that failed disclose they were working on behalf of a firm.
FINRA also found many instances where there was no hyperlink to FINRA’s BrokerCheck. “Some registered representatives’ websites did not contain a “readily apparent reference” and hyperlink to FINRA’s BrokerCheck on the web pages that included the representatives’ professional profiles, as FINRA Rule 2210(d)(8)(A) (Communications with the Public) requires.”
With precision our Eagle Eye application can find undisclosed websites, and social media accounts using the DBA names owned by your registered advisors. Enabling you to supervise and make sure that your advisors are following FINRA requirements. Then, our SQWatcher application can help you monitor, review, approve, and document changes made to your registered representatives’ websites. (Learn more about this application) These two applications become force-multipliers in your supervision program.
The annual FINRA Exam Findings Report is helpful for firms in bringing non-compliance issues to the forefront. It is a good time to reflect and examine on your own WSPs and supervisions procedures. With over 15 years of working in the financial industry, SiteQuest Technologies is an industry leader in providing innovative compliance and supervision software applications and website solutions for the financial industry.
Contact us today with your DBA supervision concerns.
Read the entire December 2018 FINRA Exam Findings:
Related Article: Are You Finding Everything You Need to Monitor?
We would like to share with you some of the trends we are finding while assisting our clients with their requirements to supervise their representatives’ web presence:
The growth of the internet has been exponential over the last decade with no signs of slowing down. Hundreds of thousands of websites have emerged on every subject imaginable, with literally billions of web pages online. As of April, 2019, the Indexed Web is estimated to contain at least 5.6 billion pages, according to WorldWideWebSize.com.
It is difficult to fully comprehend exactly how many websites and web pages there are out there in the vast internet universe. As a supervisor for a financial firm, you personally might have a better idea of how big it is when you are trying to supervise your representatives’ web presence.
When performing a basic web search, you get hundreds, if not thousands of irrelevant results. It then becomes your job, as a supervisor to try and sift through all that web clutter to document and report on anything pertinent that you might find. It can end up taking most your day just trying to find results relevant to your intended search.
Your time is valuable. Any search engine can produce an endless amount of meaningless results that need to be reviewed. Our Eagle Eye application is designed with built-in intelligence that sifts through the web’s clutter and brings only the most relevant results to your attention. Our multi-query processes and dynamically designed algorithms provide more accurate results for a quick review process.
In addition to our search results our automated screenshots feature helps you document, report and escalate any issue that is brought to light. One of our clients said
"The Eagle Eye Surveillance system has been a force multiplier in my firm’s supervisory scheme. This simple tool has transformed my internet surveillance sweep process from a time-consuming, multi-day enterprise where I view the same search results over and over to a simple process that can be completed in a couple of hours."
Another one of our clients said:
“As soon as we implemented Eagle Eye, the system found searches that were previously missed with the manual process and as a result, we updated our policy and procedures to minimize compliance risk. Also, one of our previous hurdles was demonstrating to our regulators with documentation that we were conducting the appropriate monitoring but with the audits reports, that are available directly from the system, we are able to document and show individual findings in an organized manner."
Outside OBAs and unauthorized content from your representatives or advisors are a growing concern that will always be present. Minimize your risk by utilizing Eagle Eye. See for yourself how Eagle Eye will meticulously search the web for you and your firm.
Contact us today for a demo.
With our ever-increasing dependency on the internet to do business, the SEC issued an “OCIE Risk Alert” pertaining to the various forms of electronic messaging. These can include social media sites, YouTube, Yelp, blogs, articles, websites, and more, used by advisers for business-related communications. These activities require supervision which are often time consuming, and often done as manual internet searches. These electronic messages present added challenges for supervisors in complying with certain provisions of the Investment Advisers Act of 1940.
The OCIE specifically mentioned three main areas for supervisors to address and encouraged firms and advisers to review their risks, practices, policies, and procedures regarding electronic messaging and to consider any improvements to their compliance programs that would help them comply with applicable regulatory requirements.
“Running regular Internet searches or setting up automated alerts to notify the adviser when an employee’s name or the adviser’s name appears on a website to identify potentially unauthorized advisory business being conducted online.”
With countless pages on the internet, where do you find the time to search and find your advisors online presence? Are you are utilizing a manual “Google” internet search? Do you get automatically notified when an advisor’s name appears on a website? Our Eagle Eye application is the leading-edge solution to help you find your advisors’ online footprint. Designed with built-in intelligence that searches the internet and sifts through the clutter bringing only the most relevant results to your attention.
With our “Risk-Based Review Process”, one reviewer can supervise hundreds to thousands of advisors in very little time. Learn More
“Regularly reviewing popular social media sites to identify if employees are using the media in a way not permitted by the adviser’s policies. Such policies included prohibitions on using personal social media for business purposes or using it outside of the vendor services the adviser uses for monitoring and record retention.”
Currently most social media monitoring systems rely on the honor system. Firms depend on their advisors to tell them about their use of social media. How do you protect your firm if your advisors are not so forthcoming? With billions of active users on social media daily, how do you find that Twitter handle, YouTube Channel, or that Yelp listing, that is going unsupervised?
Our Eagle Eye’s multi-query processes and dynamically designed algorithms can help you find this social media presence. Our risk-based approach to the workflow process has added system intelligence, enhanced lexicon capabilities, system learning, allowing Eagle Eye to automatically discover your riskiest advisors and alert your attention to where it’s needed. With Eagle Eye’s automated documentation, you will have everything you need including when a result was found, who reviewed it, comments that were made, and timestamps on every action taken on the account. Learn More
“For advisers that permit use of … personal websites for business purposes, contracting with software vendors to (i) monitor the social media posts, emails, or websites, (ii) archive such business communications to ensure compliance with record retention rules, and (iii) ensure that they have the capability to identify any changes to content and compare postings to a lexicon of key words and phrases.”
Our SQWatcher application is a web-based solution that automatically tracks, monitors, and archives your firms’ and advisors’ websites keeping you compliant. SQWatcher will identify and notify you of changes to website content and it has lexicon capabilities. This industry leading application brings you years of experience when it comes to web crawling, archiving and website analysis. Learn More
The OCIE encouraged firms to “consider any improvements to their compliance programs that would help them comply with applicable regulatory requirements.” The innovative applications from SiteQuest Technologies bring great improvements to any firm’s compliance program.
OCIE also encouraged advisers to stay abreast of evolving technology and how they are meeting their regulatory requirements while utilizing new technology. With the ever changing online platforms, trust a company with over 15 years of experience in providing leading-edge compliance and supervision applications, and website solutions for the financial industry. Over 40,000 advisors online presence is being tracked with Eagle Eye today. Contact us today to discuss the compliance issues you are facing when it comes to internet searches, the SEC, and the Investment Advisers Act of 1940.
Source: OCIE Risk Alert (reference page 4)
About James Cella
James Cella is the President of a growing and innovative compliance technology provider called SiteQuest Compliance. James is a customer-centric individual and focuses on building and sustaining positive and lasting relationship with his clients and partners. James and his family are "super fans" of Utah Football and have attended nearly every home game since 2002. Go Utes!