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)
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?
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)
Recently the Division of Securities, Utah Department of Commerce fined two credit unions and a licensed broker-dealer for failing to supervise the advisors working within the credit unions. (read the full report)
These credit unions are not registered broker-dealers or investment advisors. They entered into a networking agreement with a third-party broker-dealer to provide securities brokerage services to their credit union customers through registered representatives. In this case, the parties involved were not closely monitoring the actions and communications of these advisors with regards to how the advisors and the credit unions branded these services. The “lines were being blurred” and it was not clearly disclosed that these advisors worked for the third-party investment service provider, and not for the credit unions.
The emails, marketing materials, communications in print and electronic were not being supervised and in the view of the regulator, causing confusion with customers being misled. As a result, the broker-dealers and the credit unions were fined $750,000.
FINRA and the SEC are not the only regulatory agencies requiring firms to monitor their advisors. Each state has their own division of securities regulators.
Have you entered into a third-party agreement with another company to provide security brokerage services to their clients? Do you have advisors that are working in the facilities of these partners?
The biggest question of all is, “Are you sufficiently monitoring your advisors and their online presence?”
The use of our Eagle Eye application would have identified where the broker dealers’ presence was online such as social media, blogs, online articles, Yelp, YouTube and more, allowing you to review each URL. Our SQWatcher application would have alerted you to any changes on their websites ensuring that your supervision department could review and approve wording changes before they go live on the web.
We’d love to tell you more. Contact SiteQuest Compliance today to see how our applications can aid in your supervision responsibilities, saving you time and lowering your risk.
I’M SURE I HAVE SOME COMPLIANCE GAPS, BUT DON’T KNOW WHERE TO START...
It can be very challenging for financial firms to search, monitor, and document their advisor's web presence and registered websites without interrupting day-to-day business demands and operations. Yet failure to do so can leave exposed compliance gaps unaddressed and open your firm up to fines and disciplinary actions from regulatory agencies. Common compliance gaps often include improperly documented or improperly enforced policies and procedures, insufficient evidence of a WSP, undisclosed OBAs and social media accounts, as well as rogue advisor websites. Many firms know that they have gaps, but they don’t know where to start.
FINRA publishes a monthly disciplinary report with actions and fines against firms and individuals. One of the most common fines involves undisclosed OBAs. Currently, many firms work on the “honor system” with hopes that their employees with be completely honest and disclose everything required. Unfortunately, this honor system doesn’t always work. How are you to find out if your advisors have an undisclosed OBA? That is where Eagle Eye can help you close this gap with our deep web searching technology that quickly cut through the clutter of the web and bring to your attention relevant results when monitoring your registered reps.
Do you know if your advisors have disclosed all of their social media accounts? In a recent random sampling of 10 employees from a prospective client, our Eagle Eye solution found serious violations with three of the advisors including several OBAs and social media accounts that were never disclosed. This is a typical compliance gap for many firms. Is this one your firm is facing as well?
Are you sure that your firm is monitoring all of your advisors online advertising? Do you have a process in place that is easy to demonstrate to a regulator? Do you even know if they are producing advertising that you are unaware of? This could be another compliance gap your firm is facing.
In addition to all of the supervision regulations, you need to prove that your firm has WSPs in place to help document all of the actions your firm is taking to monitor web presence. For many firms, this turns into another compliance gap they need to address.
You have a broker-dealer responsibility to monitor every website that your advisors' utilize for business purposes. Many times, advisors want to have their own website to help them stand out among the thousands of other financial advisor websites out there. How are you monitoring these websites? Are you notified of every change automatically so that it can be approved? If not, here is another compliance gap you might be facing. Recently there has been an increase in fines imposed by FINRA regarding website monitoring. Just like this fine imposed just a few months ago. SiteQuest Compliance's SQWatcher program is an easy to use solution that will quickly help you fill this gap at a fraction of the cost of a fine.
Then to complete all of this monitoring you need to document all of your findings in an organized manner. Many times this is the last step in the compliance process and yet it can become one of the largest compliance gaps for a firm. Our automated documentation features found as part of our programs are detailed and searchable. We provide you with all of the information you need to respond to a regulator.
SiteQuest Compliance offers programs, support, and experience to help you bridge these gaps and respond to a regulator. A firm that is able to demonstrate compliance with tangible evidence will mitigate risks, such as costly regulatory fines, and be better prepared for unannounced visits from regulatory agencies.
Contact us today and talk to us about any gaps you need help addressing.
In September 2017, a West Coast financial firm was fined $35,000 by FINRA. It was found that the firm failed to maintain documentation or review the websites maintained by the firm’s registered representatives. (read full report) Are you responsible for monitoring your registered representatives’ websites and online presence? It can become a daunting and time-consuming task. SiteQuest Technologies brings you years of experience when it comes to web monitoring, archiving, and website analysis.
SQWatcher is our second product in this category and we have added cutting-edge technology that makes it even easier for you to keep track of what’s going on with your website(s). SQWatcher is configured with specialized “watchers” that look for the types of website changes you want to review. This technology offers a lot of flexibility allowing SQWatcher to adapt to your needs. Our archiving feature backs-up your website(s) daily so that you have a running history to help you quickly and easily respond to a regulator when audited.
In addition, this West Coast firm was also fined for “failure to establish a policy or system for approval, for their registered representatives’ business social media accounts, and did not review, approve, supervise, or retain any of the social media accounts maintained by registered representatives for securities-related business purposes.”
“failure to establish a policy or system for approval, for their registered representatives’ business social media accounts, and did not review, approve, supervise, or retain any of the social media accounts maintained by registered representatives for securities-related business purposes.”
Our Eagle Eye program will help you quickly identify any social media accounts that your registered representatives own. Allowing your firm to take action and comply with FINRA requirements. The system's automated documentation and screenshots of your findings will help you respond to a regulator.
Don’t let the time constraints of monitoring and documenting your advisor sites and web presence open you up to fines and the associated internal and external costs of a FINRA investigation like the one received by this firm. The cost of our Eagle Eye and SQWatcher programs are significantly smaller. Save time and money while protecting your firm from preventable fines. Our Eagle Eye and SQWatcher programs have two separate purposes, but working together they become a force multiplier in aiding our clients with their responsibilities.
Contact us today for your personalized demo. We will help match our programs to your needs.
Source: FINRA Case #2013034981501
Each January we like to look back at our growth and progress from the previous year, as we plan for the future and work diligently to make sure that we are meeting our client's needs and expectations. 2017 was a record-breaking year for SiteQuest Compliance.
During 2017, Eagle Eye celebrated its 4th year as one of our premier programs. 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. We doubled the number of individuals Eagle Eye monitored in 2017, resulting in over 122 million scans of the web.
Our SQWatcher program had several updates making this program an even greater resource for our clients. SQWatcher is WORM compliant when it comes to storage. We have added YouTube channel monitoring and archiving to this program as well. We also improved the bulk discarding/archiving options in the SQWatcher workflow.
We increased our client base by 25% in 2017, and this has made our team here at SiteQuest Technologies eager for 2018. We look forward to increased client interactions and helping with the challenges that a new year brings. Thank you for being part of this great growth.
If you have any questions please don’t hesitate to reach out to me personally. I look forward to another great year of continued development and expansion for SiteQuest Technologies.
Websites are always changing, trending, and updating information about products, company and or your advisors. What happens when these sites aren’t hosted by one of your approved advisor website providers? Those “rogue sites” or “off the range sites” as they are often called, that are created directly by the advisor or by a provider outside of the industry. It then becomes your responsibility to monitor, identify, respond, and document everything that happens with that website as well as archiving it.
While there are various solutions out there that help monitor websites for changes, reviewing changes and finding the right kinds of changes have proven to be difficult. With SQWatcher, we took a completely different approach and put added focus on the types of content that comes into the workflow.
SQWatcher stands for SiteQuest Watcher and our “Watcher” technology is behind everything that happens in the system. For every client, we create custom “watchers” that identify and isolate the types of changes they would like to review. As the application scans your website(s) throughout the day, it will analyze the changes that are found and determine if a review is required.
Additionally, we've learned over the years that advisor websites have many dynamic elements contained within them. These include stock tickers, date widgets, recent post sidebars, calendars, and more, all of which can change on a daily or near daily basis, often generating unwanted reviews. We’ve added a new technology that allows our clients to request “ignores” on these dynamic elements to limit unnecessary reviews. These adjustments allow the sites to be "tuned" over a very short period of time which limits the number and volume of reviews in a big way.
Finally, we’ve added powerful bulk review actions that in essence, allows a single review to apply to multiple pages. For example, if the system detected a change to the footer, that would generate hundreds of reviews in other systems, each requiring a separate review. With SQWatcher’s bulk review processes, this sort of change can be reviewed once and then applied across the remaining pages that reflect the same change, streamlining the review process like never before.
SiteQuest Technologies is proud of our long-standing tradition of listening to our customers’ needs within their job requirements. Our SQWatcher application was built with these customer requests in mind. We would love to take the time to personally show you how this application will work for your firm. Contact us today for your personalized demo.
A company from Virginia was recently expelled from FINRA membership earlier this year for several violations. Some of the FINRA findings included;
“That the firm included issuer communications on its website that it knew or had reason to know contained untrue statements of material facts or were otherwise false or misleading.”
If a claim is filed against your company for posting statements on your website that the claimant said is misleading or untrue, are you able to defend your company? Do you have the documentation and reports to support your response?
Our SQWatcher application is a web-based tool that not only archives your website, but also analyzes it each day. SQWatcher creates readily accessible backup files that can be easily retrieved to immediately identify and fix something that could have gone wrong.
It’s also important to note that unlike other archival systems that may only take a screenshot to show you what the website “looked like” in the past, SQWatcher collects the actual HTML code for every page on your clients’ website(s). This provides the ability to not only view the page in question, but also browse the rest of the site as it appeared in the past as part of your review process.
Are you responsible for monitoring one or more websites for your company? This can become a daunting task for any financial supervisor with the continual changes and updates. Are you notified when website information is updated so that you can review and ensure that the changes made online are correct? SQWatcher has taken this into account so that you are automatically notified.
This same Virginia firm was also cited by FINRA for “not reasonably supervising its activities of those of its associated persons.”
Our Eagle Eye product is the first of its kind application that is designed specifically to help the financial industry easily and effectively supervise the web. Eagle Eye automatically searches, documents, and reports on your web supervision responsibilities so you have everything you need to find and address issues before they are brought to your attention by a regulator.
Eagle Eye and SQWatcher working together are a force multiplier in your supervisory scheme. The cost of these applications are just a fraction of the cost a fine.
Working in the finance industry for over 15 years SiteQuest Technologies is an innovative partnership for your firm. We work closely with your supervision departments making sure that our products are continually evolving and optimized with your concerns in mind.
Contact us today to see how we can assist you in your web supervision needs.
In December, 2016 a firm in the Midwest was fined $12,500 from FINRA.
FINRA found that the firm failed to provide evidence an adequate review of disclosed outside business activities for its registered representatives in outside business activity questionnaires submitted by the registered representatives. The findings also stated that the firm’s WSPs stated that the firm would review firm and registered representative websites monthly, and that the review will be evidenced in the firm’s Supervisory Journal. During the course of a three-month review period, the firm’s Supervisory Journals failed to contain documentation of any review of firm or registered representative websites.
Have you heard of SQWatcher? It stands for SiteQuest Watcher. SQWatcher automatically scans, monitors, and archived the websites that you are required to supervise. Unlike other archival systems that may only take a screenshot to show you what the site “looked like” in the past, SQWatcher collects and documents the actual HTML code for every page on your clients’ website(s). This provides you the ability to not only view the page in question, but also browse the rest of the site as it appeared in the past as part of your review process.
Do you have difficulties monitoring your representative’s outside business activities? Eagle Eye is a first of its kind application that is designed specifically to help the financial industry easily and effectively supervise the web. Aiding in your ability to find and document outside business activities. This time-saving solution automatically searches, documents, and reports on your web supervision responsibilities so you have everything you need to find and address issues before they are brought to your attention by a regulator.
Eagle Eye and SQWatcher working together are a force multiplier in your supervisory scheme. The cost of these applications are just a fraction of the cost a fine.
The average FINRA fine handed out in 2016 was $437,466.
Contact us today for your personalized demo so that we can demonstrate how these programs will benefit your firm.
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!