Today’s blog is authored by Joanna Belbey, Social Media and Compliance Specialist, Actiance. Follow Joanna @Belbey or connect with her on LinkedIn.
Of all the conferences that I attend, the FINRA Annual Conference is my favorite…
From a personal point of view, I get to spend three days with former colleagues, which are some of my favorite people, ever. I also don’t have a speaking role, so there are no butterflies in my stomach. It’s so well organized, that as an exhibitor, I just show up at the Actiance booth and smile. The food is always great and this year FINRA even introduced an app. The app made it easy to create and follow a schedule, plus provided links to the session handouts. No more big conference book to lug around. As a former colleague told me, “We strive to make improvements and offer something new each year.”
Of course professionally, attending the FINRA Annual Conference is a great way to catch up with clients and hear how member firms are interpreting and rules and regulations and pose questions directly to the regulators. There wasn’t a lot new this year, mostly reinforcing what we already knew.
This is the first in a three part series that highlights the sessions that I attended:
Suitability session
Suitability goes to the core of the business. Firms must demonstrate reasonable due diligence in collecting information about clients so that they “Know Your Customer” (KYC). Financial Advisors must understand the investing goals of their clients so that they may make informed recommendations. FAs also must be trained so that they understand what they are selling, especially with the rise of complex products. And as you get more specific, the suitability rules kick in. As one of the panelists, Daniel Kosowsky, Managing Director of Morgan Stanley Wealth Management summarized, “Suitability has been the hallmark of the broker dealer compliance all along”.
Conversation with Elisse Walter, Commissioner, Securities and Exchange Commission session
Commissioner Walter reiterated the SEC stance that there should be a uniform fiduciary rule for Financial Advisors and that there should be equal protection for investors. (Editor’s Note: “Financial Advisors” is a general term that includes both Registered Representatives (RRs) and Investment Advisors (IAs). Not only are RRs and IAs governed by different regulators, they are currently held to a different standard when making recommendations to their clients.) Walter also conveyed that Chief Compliance Officers (CCOs) are the guardians of the public interest and should report directly to Senior Management. She warned that CCOs should be forthright with management and “stick to their guns” or face the consequences. Walters (as well as Richard Ketchum, Chairman and CEO of FINRA) in another session), shared her concern about investors in fixed income who may not understand the relationship between interest rates and earnings. She advised that investor education is needed before the rates go up.
Fraud Protection session
There are increasing opportunities for fraud. These include social media, crowdfunding, real estate (REITs) IPOs, venture capital and market volatility in general. Some specific examples include how hacking social media accounts can move markets, criminals taking advantage of self-directed IRAs and takeovers caused by customers clicking on links that compromise their accounts.
Or in other words, “More methods for bad guys to commit fraud”, per Cameron Funkhouser, EVP FINRA Office of Fraud Detection and Market Intelligence. But, “We try to get ‘em at FINRA. Investor protection is key”.
For more on the FINRA Annual Conference, check back here on Wednesday for Belbey Blogs: FINRA Annual Conference 2013 – Part II of III (Cyber Security, Using Social Media Tools) and Friday for Belbey Blogs: FINRA Annual Conference 2013 – Part III of III (Ask FINRA Senior Staff, Social Media Considerations, and Communications with the Public).
Actiance 