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

Featured video

Gadget Girl

Orion's Clarke: Why integration is paramount for RIAs right now

Orion has tapped into a huge demand for customizable, integrated solutions that let advisers spend more time building their business. Hear from Eric Clarke and two of Orion's integrated partners to get their thoughts.

Latest news & opinion

Senate committee approves tax plan but full passage not assured

Several Republican senators expressed reservations about the bill, and the GOP cannot afford too many defections.

House passes tax bill, focus turns to Senate

Tax reform legislation expected to have more of a challenge in upper chamber.

SEC enforcement of advisers drops in Trump era

The agency pursued 82 cases against advisers and firms in fiscal year 2017, down from 98 the previous year.

PIABA accuses Finra of conflicts of interest

Public Investors Arbitration Bar Association report slams self-regulator over its picks for board of governors.

Betterment launches 'free' charitable-giving platform

Robo-software provider lets investors donate directly from their accounts, and will not charge charities with less than $1 million on the platform.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print