A broker dealer firm must meet specific requirements to have compliant practices. Regulatory consultants provide assistance with the registration process, and they help create compliant written policies and procedures that are relevant to a firm’s operations. To maintain compliance, firms should have a Financial and Operations Principal (FinOp) to verify rules and regulations are followed. Here is more information on understanding broker dealer compliance requirements for new firms:
FINRA Memberships
Filling out a FINRA New Membership Application (NMA) is extensive, and a broker dealer compliance company helps new firms through the process. The company can provide firms with an NMA Administrator, who will create the New Membership Application account and upload all required forms and documents. Applying for FINRA involves:
- Drafting a business plan
- Developing policies and procedures
- Communicating with FINRA
- Preparing for the membership interview
When creating a business plan, regulatory consultants may prepare agendas and work with management to deliver the meeting. Developing policies and procedures involves a Business Continuity Plan and an Anti-Money Laundering Program, which need to be compliant to avoid issues. Consultants are able to respond to FINRA requests and handle all communications. Firms will also have a FINRA membership interview; consultants help broker dealers prepare for this by explaining the meeting’s format and attending the interview.
Written Supervisory Procedures
Broker dealers are required to have Written Supervisory Procedures (WSP). These are core compliance documents that make sure associated persons act in accordance with proper FINRA rules and requirements. The supervisory structure should relate to a firm’s business model and actual operations. This helps firms avoid compliance risks through gaps or insufficient policies in Written Supervisory Procedures. WSP may include areas such as supervising emails, monitoring activities outside the business, and managing internal controls. Consultants help develop the supervisory procedures, but assistance doesn’t end with the initial writing. Regulatory consultants perform periodic reviews and update procedures as a firm’s operations change.
CRD Registration and Requirements
Accurately registering with the Central Registration Depository (CRD) is a compliance responsibility for broker dealers. Consultants help complete Forms BD, BR, U4, and U5, and they make sure firms register in a timely manner. Some compliance companies provide services like web CRD administration, which includes filing electronic forms. Broker dealers that need amendments filed can use compliance services to avoid registration lapses. To avoid filing errors, consultant teams also help with:
- Reporting disclosures
- Meeting filing deadlines
- Registering with state regulators
- Overseeing associated person licensing
- Monitoring regulatory training
- Coordinating fingerprint cards
- Completing Blue Sky filings
Financial and Operational Compliance
Broker dealers are required to have a FINRA Series 27 Financial and Operations Principal. The FinOp manages a firm’s financial reporting and verifies it follows FINRA financing rules. Some consulting companies outsource this role, giving firms broad industry knowledge. New firms often need a FinOp to handle all responsibilities of the role, allowing them to avoid spending resources on an in-house hire. The outsourced FinOp may also offer access to a team with varied experience working with broker dealers. A professional licensed with Series 27 helps deliver funds, manage customer assets, and oversee accounts payable and receivable.
A FinOp makes sure firms follow net capital rules; if the broker dealer goes below the minimum threshold, they may face regulatory complications. An outsourced FinOp helps broker dealers avoid this and maintain compliance by monitoring net capital daily and keeping accurate books and records. They also prepare financial statements and file reports to make sure firms meet compliance requirements and filing deadlines. Some reports a FinOp can file include FOCUS, Form Custody, SSOI, and SIPC.
Maintain Broker Dealer Compliance
For broker dealers, maintaining compliance is an ongoing requirement, and they need to set up proper policies and procedures from the beginning. Developing a business plan with these policies involves creating a framework and WSP that reflects the firm’s actual operations. Regulatory consultants help firms register with FINRA and CRD and make sure forms are completed correctly, helping them avoid compliance gaps. Alongside providing FinOp services, a consultant company can outsource the Chief Compliance Officer (CCO) role. They are also able to assist a firm’s in-house CCO if the broker dealer only needs assistance on a retainer basis or for specific projects. Work with a regulatory consultant today to maintain broker dealer compliance.
