Let’s face it, the coronavirus pandemic has fundamentally changed the way we do business. Most of our industry is working from home, learning to balance conference calls and kids with questions that just can’t wait or dogs that must bark while on a Zoom meeting. We’ve all been there and have our moments.
Other things have changed as well, especially when it comes to marketing and advertising. This is especially true for financial advisors who have lost the ability to connect with clients at events, lunches, in office or at home meetings or simple introductions that come from face-to-face interactions. or years, many advisor’s businesses have primarily depended on these methods to connect with current clients and meet new prospects. Social distancing and stay at home orders have eliminated these options for many advisors who are now exploring new options to prospect and connect with people.
So where are they turning? Like everyone else, advisors are turning to technology to increase their online presence with updated profiles while sharing fresh and timely content.
I recently spoke to some of our clients about trends they were seeing regarding their advisor’s marketing and advertising behaviors since social distancing and stay home orders began. One compliance manager told me his firm has seen a 30% increase in advertising submissions as well as a significant increase in the use of approved social media sites like Facebook, LinkedIn and Twitter.
Another client told me, “Advisors have ‘downtime’ and are now thinking a lot about marketing.” I followed up on how things have changed for our client as a result. “Don’t get me started on how much social media usage has jumped since this all began!” They have seen an increase of 25% to 30% in usage and a surge in new accounts being created by their advisors.
Social Media usage is certainly on the rise. A recent survey showed that 32% of Americans said they have increased the amount of time they are using social media sites like Facebook and Twitter.
Another firm told me that advisors who have typically shied away from social media, online profiles, websites, and other marketing technologies are now diving in for the first time. I was told, “Their (advisors) traditional lead generation tools aren’t available anymore. They now have time and are focusing on new ways to build their business.”
Additionally, our clients are seeing a big increase in advertising submissions for recordings from Zoom/online meetings. Advisors are continually seeking guidance on additional options for communicating and marketing to the public.
This all presents an increasing challenge in supervision and compliance, especially when there are growing limitations on human resources.
That’s where our Eagle Eye technology comes in. Eagle Eye helps our clients uncover their advisors’ web presence, locating social media accounts, websites, articles, profiles, videos, OBA’s and more. Eagle Eye creates automated documentation of what has been reviewed, who did the review, and what the website looked like at the time of review, giving our clients and regulators a complete picture of the process. They use our system to discover and “clean up” situations where the use of these sites was done without approvals or monitoring in place.
Another one of our clients shared with us that, “Thanks to Eagle Eye, it is helping me identify and address issues before they are brought to my attention by a regulator.”
With our industry evolving, SiteQuest Compliance is a preferred partner when it comes to internet supervision and website management.
Contact us today for your personalized demo where we can discuss your supervision concerns and see for yourself how Eagle Eye can support your internet supervision requirements.
2020 is a big year for us as we are celebrating 10 years of compliance partnerships. There have been many significant changes in supervision over the past 10 years, especially with an increase in workload and scope for online supervision. Trying to stay compliant with the FINRA 3110 Supervision rule can become a daunting task as the web offers an easy to use and often free resources for advisors to get their name and practice out in the public eye.
As YOUR compliance partner, we’ve observed several interesting trends that we expect to see increase during 2020.
With the increase in online articles being published on blogs, websites, and social media sites like Linkedin, many advisors are writing, being mentioned, and even cited in third party articles. We continue to see these occurrences with very little if any disclosure information and perhaps is not considered pre-approved content.
Have you heard of Quora? Quora is an online question and answer platform. 775,000 people use Quora monthly to ask questions. This is a large audience that advisors have the ability to connect with. They can publish content, answer people’s questions, and search for specific topics that relate to your industry. BUT how do you know if your registered advisors are using Quora?
Yelp is another online platform that is continually growing in popularity. The Securities and Exchange Commission recently charged three advisers and a marketing firm for violating the testimonial rule by promoting their business on Yelp. Over 4.6 million businesses are using Yelp. With 163 million Yelp reviews, how are you to know if your advisors are actively soliciting testimonials from their clients?
Adding to your monitoring struggle is YouTube. It is estimated that over 300 hours of video are uploaded to YouTube every minute! There is an increasing trend in people publishing personal video and vlogs related to their business. With over 1 billion daily users how are you to find videos uploaded to YouTube by your registered advisors if they don’t send you the direct links?
Advisors can create non-monitored social media accounts. How do you know if your advisors even have a social media account if they don’t tell you about it? How do you find these social media accounts?
One of the biggest trends that we see continuing into 2020 are the use of DBAs. FINRA observed that “certain firms were not maintaining sufficient WSPs and controls, or providing adequate disclosures regarding the use of DBA names.” Outside business activities and unauthorized content from your registered advisors are a growing concern that will always be present. 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?
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 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 your attention.
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."
You can minimize your risk and address these growing trends by utilizing our Eagle Eye application.
Contact us today for your personalized demo of how our application with work for YOUR firm.
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.
The “Communications with the Public” Rule FINRA 2210 states that “an appropriately qualified registered principal of the member must pre-approve each retail communication before the earlier of its use or filing with FINRA's Advertising Regulation Department ("Department").”
“Retail Communications” include all electronic formats as well.
In addition to supervision approval:
“Each member shall establish written procedures that are appropriate to its business, size, structure, and customers for the review by an appropriately qualified registered principal of institutional communications used by the member and its associated persons. Such procedures must be reasonably designed to ensure that institutional communications comply with applicable standards.”
Our Eagle Eye and SQWatcher applications support your compliance program when it comes to complying with this rule.
Our innovative Eagle Eye application will search the internet and allow supervisors to identify and discover your registered advisors’ online presence. Our multi-query processes and dynamically designed algorithms provide more accurate search results for supervisors to quickly review.
With our automated documentation and reporting features, 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 during the online supervision of your registered advisors.
SQWatcher will supervise and archive all websites, even those not hosted with your approved providers. It will organize web-page changes into a manageable, easy to use workflow. Automatic triggers based upon your requirements will notify you of pending reviews.
These products were developed for the compliance supervisors who are looking for automated solutions to replace manual processes that prove to be ineffective and tedious.
Note: NASD Rule 2210 has been superseded by FINRA Rule 2210.
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?
Did you read FINRA’s news release on October 1, 2018, entitled “FINRA Announces Plan to Consolidate Examination and Risk Monitoring Programs”? (Read the full-text news release)
FINRA President and CEO Robert W. Cook said, “By directing our expertise and resources in a more tailored way, we will become more effective at examining for compliance.”
Bari Havlik, who is overseeing this new program said, “Implementing a unified program structure will help make us a more agile and risk-focused regulator.”
So what does this mean for you as a supervisor?
This is a potentially massive shift in focus when it comes to FINRA exams and while it’s early, it appears that exams will now be more comprehensive with a wider area of focus than has been done in the past. Instead of focusing on only trading compliance or financial compliance, exams will likely be broader in nature. This new program is likely to zero-in on the supervision processes your firm has in place beyond the focused scope you’ve been used to.
This consolidation will force firms to dig a deeper into their WSPs and supervision processes including an examination of how they supervise the web.
We have over 15 years of experience in providing leading-edge compliance and web supervision software applications and website monitoring and archiving solutions for the financial industry.
Contact us today. Tell us your concerns when it comes to your “Risk Monitoring Programs” and we will share with you the solutions SiteQuest Compliance has developed for the financial industry.
Continually Making Sure Your Monitoring Records and Documentation are in Order
This is not a preparedness matter to take lightly. Just last November FINRA fined a Tier One Company $2.6 million for failures in required electronic records and email retention. Read the full report.
The benefits of maintaining accurate, reliable and usable records can help to increase the efficiency and effectiveness of your business. It will ensure your firm is able to access information when required and meet all accountability and compliance requirements. Below are some suggestions that are beneficial in establishing and making sure that an effective record keeping and documentation system is in order when you are monitoring your associates' web presence.
Planning. Establish what processes are needed for monitoring records to be effectively maintained and how this will be achieved. Planning a monitoring process will help you maintain a record keeping system that works for your firm and provides clear expectations for supervisors and compliance officers.
Consistency. To make it easier for compliance staff members to do their job, have information collected and stored in a consistent way within your firm's network; all staff should follow the same policies and procedures.
Communication. Have all your staff made aware of, and ensure they understand, the FINRA general supervision requirements. Verify that all supervisors know and follow the record keeping policies and procedures established by your firm. By communicating expectations clearly, you will benefit from consistent record keeping standards.
Modify. Don’t be afraid to modify your record keeping system if you find a more efficient way to achieve results. Regular reviews of your record keeping systems will keep them up-to-date and operating in a way that is beneficial to your firm.
Responsibility. Know your responsibilities—what to record, how to maintain records and how long they should be kept. Having accurate and reliable records during an audit will allow you to easily confirm your firm’s compliance.
Review. Encourage staff to provide feedback on how the monitoring record keeping system is working and how it could be improved. In doing this, you may gain valuable suggestions that will bring continuous improvement to your administrative records, improving the efficiencies of the practice.
Embrace technology. Regularly investing in technology will help improve the efficiency of your general supervision monitoring requirements. Your staff will appreciate any efforts made to improve and automate the task of keeping records, giving them additional job satisfaction. Additionally, removing manual steps not only makes the record keeping process more efficient, it also makes the records uniform and reduces the risk of human error.
Our clients have found that Eagle Eye’s automated reporting features saves them valuable time. With just a click, you will have everything you need including when a result was found, who reviewed it, comments that were made and time stamps on every action taken on the account. From a regulatory point of view, with Eagle Eye’s automated screenshots you will have the full story of what content looked like at the time of review, giving you everything you need to respond to a regulator.
Supervising the web doesn’t have to be difficult! Let us show you how Eagle Eye is a more effective solution. Contact us today for a demo.
Did you know that September is National Preparedness Month? Emergencies can happen at anytime and anywhere. Ready Business is a resource that assists businesses in developing a preparedness program by providing tools to create a plan that addresses the impact of various hazards. Preparedness is the key to ensuring that your business will continue after a disaster.
In light of this national observance, our blog is focusing on preparedness and preparing for an audit. We understand that the arrival of FINRA examiners at your firm may cause some concern—especially if it’s your first examination, or if it has been a while since your last audit.
How can I help my firm prepare for a FINRA audit?
Tell your staff about the audit. This also helps those staff members that FINRA needs to contact, identify and prepare the records and information that they need to have available when the audit begins.
Review past audits. If your firm has been audited in the past, it is worth reviewing the last audit report. Often past audits have recommendations for improvements. In conducting routine audits, FINRA’s purpose is to identify opportunities for improvement, which are in the best interests of the firm being audited and their clients.
Identify an audit contact person who can act as a liaison person to work directly with the auditor. This staff member should be responsible for ensuring that auditors have access to records and files or any other resources needed to complete the audit. This person acts as the main point of contact as the audit progresses so that FINRA can continue to keep your firm informed of how the work is going. Your firms’ contact person may find it useful to schedule meetings with FINRA periodically throughout the audit process to help monitor how things are progressing. This is a good way to facilitate communication, resolve issues on a timely basis, and correct any misunderstandings.
Cooperation is essential to a successful audit. Depending on the type of exception, if your firm can demonstrate swift corrective action, it may not appear in the final Examination Report.
Assemble appropriate and current information about your firm that you think might help FINRA in gaining an understanding of your administrative structure, nature of your operations, and knowledge of employee roles and responsibilities. Other information that might be helpful to have on hand could include key procedures or policies, organization charts and financial information such as budgets and sample management reports.
Hot Topics. FINRA is really focusing on social media and cyber security preparedness as part of their audits right now. Are you prepared to respond (with proper documentation) to a regulator when they inquire with regards to your supervision preparedness? Are you finding everything that you are required to monitor? Do you know for certain that your employees have properly disclosed all OBAs? Being prepared to address these "hot topics" will help in the event that you are audited.
A FINRA audit is an excellent opportunity to take a thorough look at the risks impacting your business and the controls put in place to mitigate those risks.
Please note that these are only general steps recommended to prepare for an audit. We recognize that specific steps and information requests that are unique to your firm will be identified and communicated to you as you interact with auditors.
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!