Recently released results from a sweep exam show that state-registered investment advisers must do more to prevent and address financial abuse of elderly investors, regulators say.

“The results of this multi-state coordinated initiative show that investment advisers must make improvements in recognizing and reporting cases of suspected abuse,” said Lisa A. Hopkins, NASAA President and West Virginia Senior Deputy Commissioner of Securities, in announcing its findings of deficiencies in policies to protect seniors and vulnerable persons. “Our hope is that this data will foster greater and earlier detection and reporting of suspected financial exploitation of older Americans.”

NASAA’s push for state-registered IAs to do more came just a week after it urged legislators to enact more laws and take more steps to address the financial abuse of elderly investors. “These recommendations are designed to strengthen ongoing efforts and collaboration by industry and government agencies in preventing and detecting senior financial exploitation,” NASAA wrote in pushing for more protection for senior investors in a recently released legislative commentary on NASAA’s Senior Model Act.

In pushing both state-registered IAs and legislators to do more, NASAA has demonstrated that it considers financial abuse of elderly investors to be a multi-faceted problem that requires multiple solutions, said Margie Webber, director of regulatory compliance for RegEd. Additionally, NASAA has also advocated for comprehensive education and training, including through resources such as elderly abuse prevention training for the securities industry that NASAA, FINRA, and the SEC recently released jointly.

“NASAA knows that enacting state laws and establishing policies and procedures within firms are not enough. State-registered investment advisers must also ensure that staff is properly trained and that policies and procedures are followed,” Webber said.

Coordinated exams find deficiencies among state-registered investment advisers

The recently released results of the coordinated sweep exam by state regulators showed that state-registered investment advisers largely lack policies, procedures, and training for preventing or handling financial abuse of elderly investors. Specifically, in 1,206 routine investment adviser examinations that were conducted from Jan. 1 to July 7 and covered 10 categories of compliance, state examiners found the following deficiencies related to protecting seniors and vulnerable persons:

• 58.53% of state-registered IAs did not have policies or procedures for suspected financial exploitation
• 23.5% of state-registered IAs did not provide training regarding suspected financial exploitation of vulnerable persons
• 17.72% of state-registered IAs either did not have supervision and compliance in place for the protection of vulnerable clients or such measures were inadequate
• 8.29% of advisers did not maintain training content for protecting vulnerable persons
• 7.83% of advisers failed to provide training in the protection of seniors and vulnerable persons to all appropriate personnel
• Based on the exam findings, NASAA recommended that state-registered investment advisers add policies or procedures for seniors and vulnerable persons to include training of personnel. “Establishing policies and procedures and training staff to follow them are of great importance to state examiners,” Webber said.

State securities regulators have regulatory oversight responsibility for investment advisers with assets under management of $100 million or less. Of the asset-managing investment advisers included in this year’s coordinated examinations, 67% had assets under management between $30 million and $100 million and 33% had assets under management of less than $30 million, according to NASAA.

Compliance technology can help state-registered IAs

RegEd helps state-registered IAs protect against financial abuse of elderly investors through its compliance education and regulatory technology solutions for the securities industry. RegEd’s compliance management platform includes the following solutions (among others).

• Education and Training Solution Suite – Advanced learning management technology streamlines the creation of a firm’s annual compliance program, simplifies course enrollment, provides access to timely course materials, and efficiently tracks course completion.
• Policies and Procedures Management Solution – An enterprise workflow, work-process, and task management solution enables comprehensive, end-to-end administration and oversight of all elements of a firm’s policies and procedures.

Schedule a consultation to learn more about how RegEd’s enterprise compliance solutions improve efficiency and mitigate risk.

About RegEd

RegEd is a leading provider of RegTech enterprise solutions that address Advertising Review, Conflicts of Interest, Audit Management, Compliance Disclosures, Regulatory Change Management, Onboarding, Licensing and Registration, and more. RegEd works with hundreds of enterprise clients, including 80% of the top 25 financial services firms.

Established in 2000 by former regulators, the company is recognized for continuous regulatory technology innovation with enterprise-grade solutions hallmarked by workflow-directed processes, data integration, regulatory intelligence, automated validations, business process automation, and compliance dashboards. The aggregate drives the highest levels of operational efficiency and enables clients to cost-effectively comply with regulations and continuously mitigate risk.

Trusted by the nation’s top financial services firms, RegEd’s proven, holistic approach to RegTech meets firms where they are on the compliance and risk management continuum, scaling as their needs evolve and transforming the value proposition that compliance delivers. For more information, please visit https://www.reged.com.

The North American Securities Administrators Association (NASAA) urges legislators to enact more laws and take more steps to increase protection for senior investors.

NASAA reiterates its ongoing concerns about the potential financial exploitation of seniors and vulnerable adults while also recommending additional protections in a recently released legislative commentary on NASAA’s Senior Model Act.

“Through this legislative commentary, we hope to encourage states to continue to adopt report and hold laws based on the Model Act,” said Lisa A. Hopkins, NASAA President and West Virginia Securities Commission General Counsel and Senior Deputy Commissioner of Securities, in announcing the commentary’s release. “We believe adopting these types of laws and implementing the recommendations outlined will go a long way to increasing protection for senior and vulnerable adult investors.”

NASAA has long advocated for the protection of senior investors. The new legislative commentary comes from a year-long review of the efficacy and implementation of state laws modeled on or influenced by NASAA’s Senior Model Act, which the association adopted in 2016.

“NASAA has been a leading proponent of protections for senior investors,” said Margie Webber, director of regulatory compliance for RegEd. “Their efforts have helped curtail financial exploitation across the country and they continue to push for new laws and regulations.”

Progress in protections

NASAA’s model act provides state regulators and industry participants with information about the need to protect seniors and vulnerable adults as well as tools and suggested regulations for deterring, reporting, or addressing financial exploitation. Thirty-four states have adopted statutes based on or similar to the model act’s provisions, including three states in 2021. Two more states have pending legislation that includes similar provisions.

Key provisions of the model act include:

• Mandatory reporting of financial exploitation committed or attempted
• Notification of reporting only to third-parties previously designated by the senior or vulnerable adult, except if that third-party is suspected of financial exploitation
• Delayed disbursements of funds from an eligible adult’s account for up to 15 business days “if the broker-dealer or investment adviser reasonably believes that a disbursement would result in the financial exploitation of the eligible adult”
• Immunity from administrative and civil liability for qualified individuals, broker-dealers, or investment advisers who comply with the act’s provisions in good faith
• Requirement that broker-dealers and investment advisers comply with requests for information from agencies or law enforcement in cases of suspected or attempted financial exploitation

In its year-long retrospective review of the Model Act and its impact, NASAA determined that no amendments were necessary. “The information derived from the review indicated that the Model Act and similar report and hold laws have been overwhelmingly successful at protecting investors. Securities regulators in several states reported that report and hold laws are being used to delay disbursements, and in some states, transactions in cases of suspected and attempted financial exploitation. No state securities regulator reported concerns of systematic inappropriate use of these holds,” NASAA wrote in its recently released legislative commentary.

Recommended improvements

However, NASAA did recommend ways to make the model act more effective. “These recommendations are designed to strengthen ongoing efforts and collaboration by industry and government agencies in preventing and detecting senior financial exploitation,” NASAA wrote.

NASAA’s recommendations include:

Approaching cases of suspected financial exploitation in a multi-disciplinary manner

Creating a network of agencies and resources would help investors who may experience financial exploitation and other harmful acts, says NASAA, which offers a taskforce toolkit to assist its members with starting a partnership with other state and provincial agencies dedicated to preventing senior financial exploitation, generating resources, educating the community, and advocating for the needs of older and vulnerable victims.

Promoting the use of a trusted contact

The Model Act’s provision that allows firms to contact a third-party previously designated by the client, such as a trusted contact person, is an effective, yet often underutilized tool in assisting investors who face financial exploitation, according to NASAA. Jurisdictions should continue to encourage firms and associated persons to discuss the merit of appointing a contact person with clients, NASAA says.

Providing ongoing training for potential reporters and agency staff

Ensuring that state securities regulators, adult protective services agencies, firms, and anyone who encounters financial exploitation know the relevant rules is crucial, NASAA says. Therefore, the association supports comprehensive education and training, including through resources such as elderly abuse prevention training for the securities industry that NASAA, FINRA, and the SEC recently released together.

“NASAA wants to protect seniors from financial exploitation but it knows that it needs broad support. It also recognizes that it will take an ongoing effort,” RegEd’s Webber said.

Firms can be particularly helpful through their work with clients, which makes the ongoing training that NASAA recommends even more important. “Financial professionals are ideally positioned to protect seniors and can do so through proper policies, procedures, and training,” Webber said.

RegEd can help firms protect seniors through its compliance education and regulatory technology solutions for the securities industry. RegEd’s compliance management platform includes the following solutions (among others).

• Education and Training Solution Suite – Advanced learning management technology streamlines the creation of a firm’s annual compliance program, simplifies course enrollment, provides access to timely course materials, and efficiently tracks course completion.
• Policies and Procedures Management Solution – An enterprise workflow, work-process, and task management solution enables comprehensive, end-to-end administration and oversight of all elements of a firm’s policies and procedures.

Schedule a consultation to learn more about how RegEd’s enterprise compliance solutions improve efficiency and mitigate risk.

About RegEd

RegEd is a leading provider of RegTech enterprise solutions that address Advertising Review, Conflicts of Interest, Audit Management, Compliance Disclosures, Regulatory Change Management, Onboarding, Licensing and Registration, and more. RegEd works with hundreds of enterprise clients, including 80% of the top 25 financial services firms.

Established in 2000 by former regulators, the company is recognized for continuous regulatory technology innovation with enterprise-grade solutions hallmarked by workflow-directed processes, data integration, regulatory intelligence, automated validations, business process automation, and compliance dashboards. The aggregate drives the highest levels of operational efficiency and enables clients to cost-effectively comply with regulations and continuously mitigate risk.

Trusted by the nation’s top financial services firms, RegEd’s proven, holistic approach to RegTech meets firms where they are on the compliance and risk management continuum, scaling as their needs evolve and transforming the value proposition that compliance delivers. For more information, please visit https://www.reged.com.

RegEd CLEARXchange^SM enables real-time validation of contracting, licensure, education/training, appointment and registration for an instant “clear to sell.”

RALEIGH, N.C., September 17, 2021 — Agents can place compliant business faster with the newly released RegEd CLEARXchange, the financial services industry’s most comprehensive Clear to Sell^SM solution for eliminating “not in good order” (NIGO) transactions and improving agent and adviser satisfaction.

RegEd CLEARXchange offers a frictionless path to placing business and paying commissions compliantly by automatically validating that the producer holds the proper licenses and appointments for the business they are placing and for which they are receiving payment. The real-time “clear to sell” positions a properly credentialed producer to immediately place compliant business as they are onboarded.

Only RegEd CLEARXchange delivers a real-time “clear to sell” by instantaneously validating licensure, appointment, registration, education, and mandated training at the source, including just-in-time training completions, thereby improving efficiency for firms and the user experience for producers.

By accessing data directly from the source in real-time, RegEd CLEARXchange enables producers to immediately fulfill training requirements. To date, more than 920,000 agents have taken just-in-time training from RegEd’s Annuities and Industry Training Platform to complete required courses before they were on the agent file from the carrier.

Debra Freitag, Chief Strategy Officer at RegEd, said, “With RegEd CLEARXchange, firms and producers do not have to delay placing business or paying commissions while waiting hours or days for training completion reports to be run or files to be uploaded to external systems.”  Freitag continued, “Both agent and client satisfaction improve as well because policies and contracts can be bound in near-real time without the burden of redoing NIGO applications.”

As a new module of RegEd’s market-leading Enterprise Xchange Contracting, Licensing, and Registration solution, RegEd CLEARXchange can be integrated with more than two dozen commercial solutions, including account-opening, order-entry, and compensation systems such as Ebix, iPipeline, Broadridge, and DXC, as well as with regulatory and industry gateways. The solution is also fully integrated with RegEd’s Annuities and Industry Training Platform and can be integrated with third-party training providers.

When a new appointment is required, RegEd CLEARXchange will automatically generate it as well as validate that the producer has completed the mandatory state, industry, and carrier training required to place the business. If the individual’s credentials are not in good order, they can immediately fulfill the requirement via RegEd’s Annuities and Industry Training Platform.  

As the leading provider of compliance education, product training, and annual compliance programs to the financial services industry, RegEd delivers more than 1 million CE courses, insurance certificates, and training completions each year, making it ideally suited for fulfilling the requirements that a producer may have to satisfy to be properly credentialed.

With more than 200 enterprise implementations, RegEd is the industry leader for licensing and registration solutions. RegEd manages 13 million active licenses and registrations and processes more than 5.3 million insurance and securities transactions for clients annually.

RegEd CLEARXchange, Enterprise Xchange Contracting, Licensing, and Registration, and other industry-leading regulatory technology solutions will be featured at the 2021 SILA National Education Conference, which will be held in Philadelphia on September 19-22. For more information about RegEd CLEARXchange or other enterprise compliance solutions from RegEd, visit: https://www.reged.com/.

About RegEd

RegEd is a leading provider of RegTech enterprise solutions that address Advertising Review, Conflicts of Interest, Audit Management, Compliance Disclosures, Regulatory Change Management, Onboarding, Licensing and Registration, and more. RegEd works with hundreds of enterprise clients, including 80% of the top 25 financial services firms.

Established in 2000 by former regulators, the company is recognized for continuous regulatory technology innovation with enterprise-grade solutions hallmarked by workflow-directed processes, data integration, regulatory intelligence, automated validations, business process automation, and compliance dashboards. The aggregate drives the highest levels of operational efficiency and enables clients to cost-effectively comply with regulations and continuously mitigate risk.

Trusted by the nation’s top financial services firms, RegEd’s proven, holistic approach to RegTech meets firms where they are on the compliance and risk management continuum, scaling as their needs evolve and transforming the value proposition that compliance delivers. For more information, please visit https://www.reged.com.

The grace period for firms to furnish investors with Form CRS customer relationship summaries has indeed ended now that the SEC has sanctioned firms for the first time, a little more than a year after the requirement took effect.

The SEC has fined 21 investment advisers and six broker-dealers a total of $910,092. Without admitting or denying the findings, the firms agreed to be censured, cease and desist from violating the charged provisions, and pay civil penalties ranging from $10,000 to $97,523.

“Registration with the SEC as an investment adviser or broker-dealer comes with mandated filing and disclosure obligations,” Gurbir S. Grewal, director of the SEC’s Enforcement Division, stated in a July 26 release announcing why the SEC charged 27 financial firms for Form CRS filing and delivery failures.

“Today’s cases reinforce the importance of meeting those obligations and providing retail investors with information that is intended to help them understand their relationships with their securities industry professionals.”

Form CRS Requirements Protect Retail Investors

Customer relationship summaries are meant to explain the types of services a firm offers as well as the fees and costs it charges for them and to alert investors to any potential conflicts of interest or disciplinary histories on behalf of the firm or its financial professionals. Firms must also disclose any standards of conduct that they are obligated to fulfill.  The relationship summary must be written in plain English and be concise.

Firms have been required to provide customer relationship summaries to retail investors since June 30, 2020. They are also to post the summaries to their websites. Broker-dealers are to complete Form CRS while advisers use Form ADV Part 3.

Regulators shared their expectations for summaries with firms leading up to last year’s effective date and during the first 12 months that they were required. They also offered guidance on completing, filing, and distributing Form CRS.

For example, in April 2020, the SEC issued a risk alert regarding Examinations that Focus on Compliance with Form CRS. It then shared preliminary observations from their initial examinations at a Roundtable on Regulation Best Interest and Form CRS in October 2020. Then it went on to list Form CRS in the examination priorities for 2021 that it released in March.

More recently, at FINRA’s annual conference in May, executives from the industry regulator said that enforcing Form CRS would be a top item on examiners’ agendas this year. They would no longer take a “good faith approach” in which they largely assessed a firm’s implementation progress.

“Form CRS is the first stop for examiners at the beginning of an exam, both to look for compliance with Form CRS instructions and also for getting a high-altitude understanding of the firm for the exam,” said Bill St. Louis, senior vice president and firm group leader for FINRA member firms assigned to the Retail and Capital Markets firm grouping, in a panel discussion about Reg BI and Form CRS observations and expectations.

Form CRS Training Key to Compliance

If any questions as to regulators’ priorities or intents had lingered in the months since FINRA’s conference, the SEC’s first enforcement actions for Form CRS violations have since dispelled those doubts. According to the SEC’s orders, each of the firms charged missed regulatory deadlines for filing or delivering its Form CRS, or posting it to its website, until being twice reminded of the missed deadlines by their regulators — in the case of investment advisers, by the SEC’s Division of Examinations, and in the case of broker-dealers, by FINRA.

“It’s noteworthy that chief compliance officers weren’t named in these enforcement cases since they were reminded at least twice by FINRA and/or the SEC before complying,” said Margie Webber, Director of Regulatory Compliance for RegEd. “It will be interesting to see if state securities regulators will piggyback on the SEC enforcement.”

Regulators’ intent to enforce Form CRS reinforces the need for related education and training for firms, advisers, and brokers, Webber said. “Investor protection is a top regulatory priority for state and federal regulators. It should be a top priority for industry as well.”

As built-for-purpose tools tailored to the needs of broker-dealers and investment advisers, RegEd’s compliance solutions for securities firms are effective and cost-efficient. Firms seamlessly manage all aspects of their compliance programs, reducing risks and costs by automating and streamlining processes. And each solution is configured for optimal performance by RegEd’s implementation experts, who have worked with many of the nation’s largest securities firms.

RegEd’s compliance management platform includes the following solutions (among others).

• Education and Training Solution Suite – Advanced learning management technology streamlines the creation of a firm’s annual compliance program, simplifies course enrollment, provides access to timely course materials, and efficiently tracks course completion.
• Policies and Procedures Management Solution – An enterprise workflow, work-process, and task management solution enables comprehensive, end-to-end administration and oversight of all elements of a firm’s policies and procedures.
• Conflicts of Interest Solution Suite – Automated end-to-end management of request processes, compliance monitoring, and exception management associated with conflict of interest policies embeds best practices in a firm’s compliance program. 

Schedule a consultation to learn more about how RegEd’s compliance solutions enable securities firms to improve efficiency, effectiveness, and transparency across the enterprise.

For additional ways to strengthen your firm’s compliance program, view our recent webinar on FINRA, SEC, and State Securities Enforcement Trends.

About RegEd

RegEd is the market-leading provider of RegTech enterprise solutions with relationships with more than 200 enterprise clients, including 80% of the top 25 financial services firms.

Established in 2000 by former regulators, the company is recognized for continuous regulatory technology innovation with solutions hallmarked by workflow-directed processes, data integration, regulatory intelligence, automated validations, business process automation, and compliance dashboards. The aggregate drives the highest levels of operational efficiency and enables our clients to cost-effectively comply with regulations and continuously mitigate risk.

Trusted by the nation’s top financial services firms, RegEd’s proven, holistic approach to RegTech meets firms where they are on the compliance and risk management continuum, scaling as their needs evolve and amplifying the value proposition delivered to clients. For more information, please schedule a consultation.