Associated person disclosures and attestations are not a “one size fits all” list of documents. The purpose of disclosures and attestations is to educate your employees on the expectations of the firm based on firm procedure and regulatory mandates. Another important purpose is to give representatives a chance to know relevant updates and changes that may require pre-approval and/or added compliance responsibilities.
Lastly, disclosures and attestations serve as a risk mitigation tool. Failing to disclose key information puts the representative, the firm, and their customers at risk. Types of key information can include private securities transactions, outside business activities, or gifts and gratuities. Regulators often require the firm to supply documentation on any disclosures or attestations sent by the firm, employee response, principal signoff, and any necessary follow-up.
Below are a few key disclosures and attestations that firms should consider as part of their overall program.
Personal Investment Accounts
FINRA Rule 3210, Accounts At Other Broker-Dealers and Financial Institutions, requires effective supervision of trading activities including trading done by employees away from their employer. Firms should maintain a record of disclosures made. In addition, the designated principal(s) of the firm should have a process to review and approve all activities.
Some registered investment advisor (RIA) firms require periodic confirmation of trades and holdings to ensure adherence to the SEC Code of Ethics.
Private Securities Transactions
Rule 3280, Private Securities Transactions, requires written notice to a member firm prior to approval. Once a member firm receives notification, they must evaluate if the transaction or activities would comprise a private securities transaction. If yes, the firm must then determine proper books and records based on the activity, documentation, and formal approval by the firm or supervisory needs. The member firm may also set certain limits and restrictions related to the activity. The review and decision process must be appropriately documented and filed.
Communications with the Public
Rule 2210, Communications with the Public, categorizes types of communication and notes the required review, approval, and recordkeeping. Attestations that provide guidance on the firm’s policy, as well as regulatory mandates, allow firms to ensure that employees understand and confirm in writing that they will abide by the policy.
Understanding what types of social media are used by employees and their future intentions is a useful disclosure. Social media forms should also supply the firm procedure for review, approval, and usage across all platforms.
Annual Attestations or Questionnaires
These documents often contain valuable knowledge and disclosure elements. Forms often include language that requires associated persons to attest or confirm that they understand the policy. Furthermore, they must attest that they did or did not engage in a specific activity. Examples include insider trading, gifts and gratuities, loans to and from clients, criminal or financial disclosures, and more. Firms should maintain a record of disclosures made. In addition, the designated principal(s) of the firm should have a process to review and approve all activities.
Outside Business Activities
Rule 3270 requires that registered representatives and other supervised persons provide prior written notice of any outside business activity (OBA) to the member firm. Firms must also evaluate any potential conflicts of interest or limitations. Firms should maintain a record of disclosures made. In addition, the designated principal(s) of the firm should have a process to review and approve all activities.
Reviewing regulatory examination priorities, prior internal or independent audits, previous investor complaints, and other regulatory best practices should be considered when customizing your attestations and/or questionnaires. Please note that disclosures and attestations alone are only one key element. The firm should ensure that there is a process to track, review, and update information, as well as following up on exceptions and providing principal signoff of all forms.
Our expert consultants work with firms on creating an effective process for Associated Person Disclosures and Attestations. Please contact our office for more details.