All in the name of compliance

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Aug 1, 2005 4:36 pm

I am an indy reg rep and a RIA with the state. My problem is that it seems the broker-dealer, which I pay to clear trades and handle statements, belives that they should be involved (having me pay to advertise their name and brand) in all my business dealings. I would like to know if anyone else has experience at keeping the two businesses seperate. Also, are there any indy firms who are content with handling compliance issues relating to the soliciting, offering, buying and selling of securities without trying to involve themselves in all aspects of a seperate business? I don't want to be handled as an employ that they can reap rewards from without paying benefits and social security.

Aug 2, 2005 9:45 am

It used to be that indy reps with their own RIAs were pretty much left alone relative to their RIA and its activities.  Then the NASD came along in the early 90's with a Notice to Members which differentiated between RIA business that was considered a responsibility/liability of the b/d and that which was not. 


Essentially, any investment business that you did through your RIA for compensation (e.g., fee-based asset management of some type) was deemed to be a b/d related activity.  Pure fee-based advice that did not necessarily involve executing investment transactions (like charging a fee for financial planning) was deemed not to be a b/d activity.  So, because of this b/ds realized they were clearly liable for certain RIA activities of their reps and they had to supervise those activities & receive compensation for doing so.  Some b/ds took a conservative approach & considered ALL RIA activities as their responsibility/liability (so wanted to supervise & get paid on all RIA activities) & others followed the NASD NTM by the letter & only addressed investment for compensation activity.  That's pretty much been the state of affairs until recently.


In recent years actions by regulators, arbitrators, & courts have put a lot of focus on outside businesss activities, and b/ds have been found liable for OBA stuff that had nothing to do with the b/d.  So, because of this most indy b/ds have magnified their attention to OBAs including independent RIAs and have imposed more stringent compliance policies over OBAs than before.


Even if you could find an indy b/d that took a very liberal attitude toward your RIA activities, given the trend in the business I wouldn't count on that b/d maintaining that position for too much longer.


Aug 2, 2005 10:33 am

Thanks for the post.


Would it be beneificial / harmful just to move all clients to ameritrade, have an advisory agreement and work with them away from firms (independent or not)?

Aug 2, 2005 12:17 pm

In recent years actions by regulators, arbitrators, & courts have put a lot of focus on outside businesss activities, and b/ds have been found liable for OBA stuff that had nothing to do with the b/d.  So, because of this most indy b/ds have magnified their attention to OBAs including independent RIAs and have imposed more stringent compliance policies over OBAs than before.


This is very true. I am in the process of getting advertising and exterior building signage approved by my b/d.  I want to use  my DBA, but the sign must also include "securities offered through broker dealer name" and  "member SIPC".   If I use my DBA in a newspaper ad I have to also add that "DBA is not a subsidiary of nor controlled by broker dealer name" .   Believe me it is really hard to squeeze that all into a newspaper ad or on a sign without looking cluttered.

Aug 2, 2005 12:46 pm
babbling looney:

In recent years actions by regulators, arbitrators, & courts have put a lot of focus on outside businesss activities, and b/ds have been found liable for OBA stuff that had nothing to do with the b/d.  So, because of this most indy b/ds have magnified their attention to OBAs including independent RIAs and have imposed more stringent compliance policies over OBAs than before.


This is very true. I am in the process of getting advertising and exterior building signage approved by my b/d.  I want to use  my DBA, but the sign must also include "securities offered through broker dealer name" and  "member SIPC".   If I use my DBA in a newspaper ad I have to also add that "DBA is not a subsidiary of nor controlled by broker dealer name" .   Believe me it is really hard to squeeze that all into a newspaper ad or on a sign without looking cluttered.



Actually what you're talking about, BL, is not new and is distinct from my point about the stricter compliance over OBAs.  The NASD has always said that when you use a DBA name instead of your b/d name that it has to be clearly & prominently disclosed who your b/d is, and that your DBA is not the entity offering securities.  There can be no confusion to the public about who's the b/d and who's offering sec urities (which of course can only be a b/d). So, the "securities offered through...." is used by everybody.  The "DBA is not a subsidiary..." language varies from b/d to b/d as to policy. 

Aug 2, 2005 12:51 pm
HoughBomont:

Thanks for the post.


Would it be beneificial / harmful just to move all clients to ameritrade, have an advisory agreement and work with them away from firms (independent or not)?



Are you talking about dropping your securities licenses entirely & just operate as an RIA??  If so, then sure that is a viable option if your objective is to get out from under b/d supervision/compliance. 

Aug 3, 2005 9:14 pm

Hey Duke,


Do you remember the guys handle that used to post here about 4 years ago that said that everyone should just be their own b/d?  He also talked about having auto dialers and he also talked about his practice alot.  Anyway, becoming you're own b/d might suffice but you will still need to clear through some large company.  If you remember that guy Duke, post his handle.  My brain is old and fried

Aug 4, 2005 10:11 am

Dog, I think you're talking about "Hutch", although I don't remember the auto dialers.  He said he had his own b/d, and he posted what I thought were a lot of helpful things re marketing.   It seems like he dropped off the forum sometime after the dot-com crash.  I hope he didn't crash as well!

Aug 4, 2005 4:07 pm

Dogdoo -


You have my attention. How does someone set up their own b/d?