Your Lifeline to Breaking Away: A Compliance Checklist

The right partner firm can make all the difference in helping you to stay compliant. This concept may be something that’s been on your mind lately—especially if you’re considering becoming an independent financial advisor.

You want your partner firm to protect you and your clients and support your business growth. Here are some key items your firm can help you prepare for. Keep in mind, you’ll need to disclose some of these matters as soon as you’re affiliated with a firm.

Office Setup and Client Privacy
First things first—find a place to set up shop! You’ll also need to do the following:
  • Physically secure the client information in your office space! This includes issuing keys only to authorized personnel, implementing clean desk policies, using locking file cabinets, and securing access to servers.
  • Sign confidentiality agreements with any unaffiliated parties with access to your office, such as janitorial services, building management, or third-party technology service providers. Your new firm may have in-house solutions for your technology needs.
  • Consider using a shredding service provider.
  • Disclose any proposed arrangement to share or lease office space with unaffiliated parties, particularly those associated with other financial institutions. You’ll need to share information such as the occupant’s background, a layout of the floor plan, and details on how you’ll keep electronic and physical information separate.
Communicating with the Public
Your firm must review any advertising and materials (including self-created) used for your business, such as:
  • Email domain and signatures, doing business as or DBA, business cards, letterhead, website, and blogs
  • Any internally created materials, such as brochures, that promote your business products or services
  • Self-created statements and reports—especially materials displaying performance or account balance information
  • All business-related social media profiles for you and your staff
Books and Records
  • Keeping records is a key part of your business. Be sure to:
  • Maintain all records, such as a check log and client deliverables, either electronically or hard copy
  • Document all client recommendations (If it isn’t written down, it didn’t happen!)
  • Include copies of anything your clients sign and backup documentation in your records
  • Use secure and firm-approved electronic communication methods, including messaging, email, and texting
Disclosures and Reporting Obligations

Be prepared for the following required items:

Outside Business Activities (OBAs)

  • You must disclose any OBAs that you—and each registered person or investment adviser representative in your office—are engaged in.
  • Also, disclose any pass-through business entities, such as an LLC, you’ve created to operate your securities business. This may include operating agreements.
  • Certain activities, such as acting as trustee or another fiduciary control role for your clients, may be prohibited.

Personal Securities Accounts

  • You—and all staff with access to client information—must report personal investment accounts to your new firm.

Political Contributions

  • Document any political contributions made in the last two years. Not every contribution will be a violation or will be reportable under the rules.
  • Obtain preapproval for any proposed political contributions covered by firm and industry rules.
  • Each firm will apply industry rules regarding political contributions and “look back” provisions and sanctions.

Referrals and Solicitors

  • Disclose all formal referral arrangements, including licensing, registration, and other considerations.
  • Your new firm may prohibit arrangements with unaffiliated financial institutions.
Professional Development and Trainings

You must take continuing education (CE) courses to maintain your industry regulation and professional designations.

  • Your new firm may give you credit for recently completed CE courses. Prepare certificates of completion for them to review.
  • Track all your professional designation and insurance CE.
  • Stay up to date on any firm-required trainings.
Don’t “Just Do It”

Firms will take an individual approach to rules and regulations that apply across the industry. Working hand-in-hand with your firm will prevent issues. If you’ve received any exceptions to policies in the past, now’s the time to discuss them. When it comes to compliance, you don’t want to go ahead and just do it!

For more related content, please visit The Independent Advisor, a blog authored by subject-matter specialists at Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser

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