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 It has been over 40 years since significant changes to "The Investment Advisers Act" were adopted. To say that advisors are excited about this recent update is definitely an understatement. With all of the different communication and social media platforms available to advisors, they are eagerly looking forward to sharing testimonials with potential clients hoping to open new doors of opportunities.
Firms and their compliance departments need to take a proactive approach when it comes to addressing these new marketing updates. Testimonials and endorsements still need to be monitored and approved to ensure they are not misleading investors. Firms need to decide what types of statements they are going to approve, what platforms will be utilized, and how registered advisors are going to notify them and gain approval before any endorsement is published. Initially advisors will want to add these testimonials and endorsements to their websites and other online destinations that may or may not be monitored by compliance. Demands on compliance’s time for monitoring and approvals will certainly increase. Additionally, firms need to reevaluate their disclosure policies to ensure that advisors provide notification and documentation of what and where they wish to publish testimonials and endorsements online. Compliance departments should expect to see a large increase in their workload related to internet monitoring and approvals that need to occur. What will compliance do to monitor endorsement and testimonial platforms such as Yelp, Google Reviews, or social media platforms like Linkedin, Facebook, and Twitter? Advertisements that include third-party ratings will be required to include specific disclosures to prevent them from being misleading. Is compliance waiting for advisors to disclose everything? Are policies based entirely on the honor system? How do you discover your advisor’s online presence, including these new testimonials and endorsements if they are not disclosing them to compliance? While you are forming your compliance strategy and updating policies, procedures and workflows it is important to consider how and what technologies can assist compliance with this increased workload. As the SEC and FINRA are adapting to new technology, compliance departments need to evolve and rely on innovative technology as well to support their job requirements. For over a decade, SiteQuest Compliance has continued to be a trusted partner, supporting compliance and supervision departments with tools that can help meet these increasing demands with regards to compliance and supervision. Our Eagle Eye solution uncovers and supervises your advisors’ online footprint. It discovers social media accounts, websites, blogs, yelp pages, OBAs, DBAs, and online profiles, allowing you to address issues prior to regulatory discovery or examination. Our SQWatcher platform monitors and archives advisor websites including those that may be hosted by non-approved website providers. It creates historical records of these sites, creates workflow events of specific types of changes like new pages, changes to readable text, images, and more with customizable rules to meet your needs. This update to the Investment Advisers Act will require your firm to revise its policies. Our newly launched Policies solution is a powerful tool used to organize, version control, and distribute your firm’s policies and Written Supervisory Procedures (WSPs) to your employees and advisors. Ensuring that your advisors always have access to your most current policies with easy to search features. As your advisors are “Modernizing their Marketing Practices” contact us today to discuss your specific needs and concerns. Let us show you how we can help streamline your workflows to maximize your time, while helping to ensure you don’t miss anything with regards to internet and website supervision and content approval. Sources: https://www.sec.gov/news/press-release/2020-334 | https://www.sec.gov/rules/final/2020/ia-5653.pdf 10/1/2020
What is SQWatcher WHAT IS SQWATCHER?
SQWatcher monitors and archives advisor websites that may be hosted by non-approved website providers. It creates historical records of these sites, creates workflow events of specific types of changes like new pages, changes to readable text, images, and more with customizable rules to meet your needs. WHY DO YOU NEED IT? SQWatcher supports your firm’s adherence to regulatory requirements like FINRA Rules 2210, 3110, 3120, 4511 and 4550 by actively supervising these websites for unapproved changes and providing historical archives of the site. YOUR RETURN ON INVESTMENT SQWatcher’s powerful workflow review processes along with dynamic crawler technology allows your firm to monitor and document dozens to hundreds of websites with relatively few employee hours involved. It reduces compliance and “failure to supervise” risks while demonstrating to regulators, your firm is actively supervising these unique websites in compliance with FINRA and SEC rules. Schedule your personalized demo today!  This spring FINRA announced the formation of the Office of Financial Innovation that will serve as a central point of coordination for issues related to financial innovations by FINRA member firms, particularly new uses of financial technology.
The goal in mind to further enhance FINRA’s ability to identify, understand and foster financial innovation in a manner that strengthens investor protection and market integrity. With 10 years of experience supporting our partners in their supervision and compliance with FINRA, SiteQuest Compliance is pleased about the dedication to financial innovation. SiteQuest Compliance has a long standing tradition of being a thought-leader. Working side-by-side with customers as we develop and improve our supervision applications to meet their needs. As more and more regulation burden is being put upon financial firms, SiteQuest Compliance is stepping up and serving as a trusted partner. Learn more about our applications. Eagle Eye is the first of its kind application that uncovers and supervises your advisors’ online footprint. It discovers social media accounts, websites, blogs, OBAs, DBAs, online profiles, and events that belong to or are about your advisors, allowing you to address issues prior to regulatory discovery or examination. SQWatcher stands for our SiteQuest "Watcher". Our SQWatcher application monitors and archives advisor websites that may be hosted by non-approved website providers. It creates historical records of these sites, creates workflow events of specific types of changes like new pages, changes to readable text, images, and more with customizable rules to meet your needs. Policies organizes, manages and delivers your firms policies and WSPs. Our Policies application provides a clean, easy-to-use, easy-to-search and up-to-date experience for your advisors. Policies brings all of your procedures, policies, WSPs and other documentation into one place that can be accessed on both a desktop and mobile devices. Our customers have referred to our applications as “force multipliers” that exponentially expand their search and supervision capabilities. Firms are able to identify and address issues before they are brought to their attention by a regulator. “Innovation continues to pose new opportunities and challenges for our member firms and the broader financial services industry, and it is essential that we as regulators keep pace,” said FINRA President and CEO Robert W. Cook. With the even increasing trend for registered advisors to utilize technology to grow their online presence with updated profiles while sharing fresh and timely content. It is paramount that supervisors have support and a partner to help them with their ever increasing responsibilities. Let us show you how we can help. Contact us today to discuss your supervision challenges. Together we can lay out a plan to keep pace with technology innovations. Source: https://www.finra.org/media-center/news-releases/2019/finra-forms-office-financial-innovation-announces-haimera-workie-head 2/4/2020
2020 Supervision Trends 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."
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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."
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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. Sources: https://www.sec.gov/enforce/3-18586-90-s https://www.finra.org/sites/default/files/2018_exam_findings.pdf 10/3/2019
Chief Compliance Officer Fined by FINRA 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) 2/12/2019
Compliance with FINRA Rule 2210 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. Source: https://www.finra.org/rules-guidance/rulebooks/finra-rules/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: http://www.finra.org/sites/default/files/2018_exam_findings.pdf 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) Related Articles: 11/13/2018
MONITORING WEBSITES CAN BE DIFFICULT, TIME CONSUMING, AND SOMETIMES THEY BECOME A BIG HEADACHE 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.  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. |
About James CellaJames 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 University of Utah Football and have attended nearly every home game since 2002. Go Utes! Archives
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