Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, October 12, 2010

NASAA Identifies Most Common Deficiencies in Broker-Dealer Compliance

NASAA posted on its website its 2010 Broker-Dealer Coordinated Examination Report, which identifies the top compliance deficiencies and offers a series of recommended best practices for broker-dealers to consider in order to improve their compliance practices and procedures.  David Massey, NASAA President and North Carolina Deputy Securities Administrator. said the best practices were developed after a nationwide series of examinations of broker-dealers by state securities examiners from 30 NASAA jurisdictions in the United States revealed a significant number of problem areas.

A total of 290 examinations conducted between January 1, 2010 and June 30, 2010 found 567 deficiencies in five compliance areas. The greatest number of deficiencies (33 percent or 185 deficiencies) involved books and records, followed by sales practices (29 percent or 164 deficiencies), supervision (20 percent or 115 deficiencies), registration and licensing (10 percent or 56 deficiencies), and operations (8 percent or 47 deficiencies).

The three most commonly found problem areas involved failure to follow written supervisory policies and procedures, advertising and sales literature, and variable product suitability. Half of the examinations involved one-person branch offices, 19 percent were home offices, 18 percent were branch offices with two to five agents, 10 percent were branch offices with more than five agents and 3 percent were non-branch offices.

Based on the examination results, NASAA recommended a series of 10 “Best Practices” to help broker-dealers develop compliance practices and procedures.

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