Supervision lacking at broker-dealers: NASAA

VA violations down, but state securities group worried that not enough resources are going toward compliance

Sep 10, 2012 @ 4:34 pm

By Dan Jamieson

State regulators are seeing fewer problems with variable annuity sales but continue to see violations in some areas of supervision at broker-dealers, according to a review of 236 exams conducted in the first half of this year.

The top five types of violations: failure to follow written supervisory policies, suitability, correspondence/e-mail, maintenance of customer account information and internal audits, according to the results of the

>review, released Sunday at the annual meeting of the North American Securities Administrators Association Inc. in Coronado, Calif.

States found violations with written supervisory procedures in 24% of exams where they looked at such issues, and 20% of the time when they looked at suitability.

Regulators at the state level are concerned that problems are popping up as compliance resources at brokerage firm have been squeezed.

“We are concerned about [broker-dealers’] having enough staff to service regulatory inquiries and [provide] customer service,” William Reilly, special assistant to the director of Florida’s Office of Financial Regulation, said at a meeting of NASAA’s broker-dealer section.

“It is a concern, with the staff reductions at firms,” he said.

Firms also are skimping on exception reports they buy from their clearing firms, Mr. Reilly added.

The Florida regulator warned industry compliance people to make sure they speak with customers who have a complaint, rather than just the broker involved. In addition, firms need to beef up branch audits and follow up to ensure problems are fixed, Mr. Reilly said.

In many cases, “there are no meaningful branch office audits” being conducted, he said.

On a positive note, variable annuity violations have dropped off since a similar review in 2010.

Two years ago, VA suitability violations were No. 3 on the top-10 list of violations. This year, VA-related violations fell to the ninth spot.

“There have been some studies recently that indicated sales of VAs have dropped within the last three or four years, so we’re having fewer violations in this area,” Mr. Reilly said.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

INTV

Diversity & Inclusion Awards: 2018 nominations are open

Editor Fred Gabriel and special projects editor Liz Skinner discuss the nomination process for InvestmentNews' inaugural Diversity & Inclusion awards.

Latest news & opinion

Cetera reportedly exploring $1.5 billion sale

The company confirmed it's talking to investment bankers to 'explore how to best optimize [its] capital structure at lower costs.'

SEC Chairman Jay Clayton outlines goals for a new fiduciary standard

Rule should provide clarity on role of adviser, enhanced investor protection and regulatory coordination.

Advisers bemoan LPL's technology platform change

Those in a private LinkedIn chat room were sounding off about fears the independent broker-dealer will require a move to ClientWorks before it is fully ready.

Maryland jumps into fiduciary fray with legislation requiring brokers to act in best interests of clients

Legislation requires brokers to act in the best interests of clients.

8 apps advisers love for getting stuff done

Smartphone apps that advisers are using in 2018 to run their business more efficiently.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print