Title: Workman Securities Corporation
1Workman Securities Corporation
- 2005 Compliance Meeting
- 11 August 2005
2Introduction
- Opening Remarks
- Logistics, bathrooms, breaks, internet people
- Todays agenda
3Agenda
- 100 Opening Introduction
- 115 Compliance Issues
- 205 Break
- 215 Compliance Issues
- 305 Break
- 315 Compliance Issues
- 405 Break
- 415 American Funds Presentation
- Peter Nyhus
4Regulatory Element of Continuing Education Program
- NASD NTM 05-20 amended Rule 1120 to eliminate
exemptions - Three Regulatory Element programs
- Failure to complete places representative into
inactive status. Representative prohibited from
performing any duties and functioning in any
capacity requiring registration - Attached is listing as of 2/18/05
5Firm Element of Continuing Education Program
- Each year firm must conduct a Needs Analysis and
prepare a Plan Document - Complete required courses at www.financialcampus.c
om by December 15 - NASD mandated requirement
- WSP section 1550 for review
6Outside Business Activities
- Form update required yearly
- Registered Representative Fined and Suspended for
Engaging in a Business Activity for Compensation
Away from His Firm - NASD settled a matter
involving a registered representative who, while
associated with an NASD member, also was employed
at a casino. The representative failed to
provide prompt written notice of this outside
employment to his member firm. NASD held that
the representative's actions violated Conduct
Rules 2110 and 3030, suspended the representative
in all capacities for three months, and fined him
5,000. - WSP section 415 for review
7Selling Away
- Indexed Annuities
- Fixed Insurance products in general
- Registered Representative Barred for Selling
AwayNASD Regulation settled a matter that
involved selling away to 10 public customers. A
registered representative sold promissory notes
involving two different issuers away from the
member firm with which he was associated. For the
sales, he earned commissions of approximately
45,000. NASD Regulation concluded that the
registered representative sold away from his firm
and barred the representative from further
securities industry employment. - Registered Representative Suspended and Ordered
to Pay Monetary Sanctions for Selling AwayNASD
Regulation settled a matter involving three
instances of selling away during a one-month
period. Under the terms of the settlement, NASD
Regulation found that the transactions were "for
compensation," imposed a fine of more than
2,500, and required the registered
representative to pay restitution in excess of
7,000. NASD Regulation also suspended the
registered representative in all capacities for a
period of one month.
8Financial Independence CorpWorkman Securities
Insurance Division
- Dana Vietor brings 26 years of annuity, life and
LTC experience to you to increase your business
and is glad to help you with any marketing
questions or run any quotes you need for your
clients. - Linda Kokjohn, our licensing and new business
coordinator, processes all rep fixed business
licensing applications and your new business
applications. She reviews all of your new
business and processes your applications on the
day of receipt, if all information supplied is
complete. - Chris Greiner, our pending business coordinator,
tracks all of your fixed business client
applications to policy completion once your
application has left our office to go to the
carrier. She keeps you informed as to the status
of your client application.
9Preferred Carriers
- American General
- Banner
- First Colony
- Jefferson Pilot Financial
- John Hancock (Manulife)
- Lafayette Life
- Met Life Investors SPIA
- Mutual of Omaha/United of Omaha
- West Coast Life
10Linda Kokjohn New Business Contracting Manager
11Licensing/Contracting
- Request and submit agent contracting to Linda
Kokjohn - Agent contracting must be dated prior to
application date - Current resident non-resident insurance
licenses - Agent contracting will not be completed or
approved until business has been submitted - If you have a fixed carrier that we are not
currently appointed with and you want to write
their product through us Let Us Know !!!
12New Business
- Complete applications
- Illustrations
- Current resident non-resident insurance
licenses - Agent contracting will not be completed or
approved until business has been submitted - If you have a fixed carrier that we are not
currently appointed with and you want to write
their product through us Let Us Know !!!
13Chris Greiner Pending Business Coordinator
14Pending Business
- Complete applications cannot be stressed enough
- Prompt return of information from the
representative requested by the carrier through
the pending business department will speed the
acceptance of the application by the carrier - The best form of up-to-date communication today
is through email
15All of your fixed production dollars go toward
your total annual production. . . retroactive
to day one!
- 50,000 base contract payout is 80
- Plus 25,000 fixed insurance GDCs
- 75,000 total equals 85 payout
- 2,500 retroactive increase on the base 50,000
plus 1,250 increase on the fixed business or
3,750 increase in the commission to you
16Thank you! Workman Securities representatives
for the life, annuity and long term care
business you have placed with us!
17- We would like to reintroduce you to
- Benefit Retirement Services, LLC.
18Jim Halpin Account Administrator
19Plans Administered
- 401(k)
- Profit Sharing
- Money Purchase
- Group 403(b)
20- Since November, 2004 we have grown from 0 to
22 million dollars in assets under
administration.
21Plan Expenses
- Plan Installation
- Plan Setup Consultation 300.00
- Per Employee Installation 6.50
- Plan Document 400.00
- Annual Plan Services
- Base Annual Fee 900.00
- Per Participant 22.50
-
- Per Event Services
- Loan Processing Establishment 75.00
- Annual Loan Processing 25.00
- Qualified Domestic Relations Order 50.00
- Brokerage Accounts 50.00
- Life Insurance Policies Processing 50.00
- Document Mainteince Fee 75.00
22- For being a Workman Security Representative we
only offer you special pricing on all new plans
and new monies coming into Workman Securities. - Effective August 1, 2005 we offer our new 50/50
Plan. - If you have a potential client that would like
to save money on their administration expenses
you can offer him FREE services and give him a
reason to make a change. How can you do this?
Heres how - If you have a client with a million dollar
investment and his annual administration costs
are 2000.00 a year you, the representative,
would pay Benefit Retirement Services 1000.00
and we would waive the other half of the
administrative costs. - The million dollars goes to Workman Securities
as new monies with an average GDC of 2 or
approximately 20,000 with a payout of 85 which
equals 17,000 the administration cost of
1000.00, you are still making 16,000 plus
receiving on going fees for each deposit. - This waiver of fees is good for the first plan
year only.
23Takeover Checklist
- Service Agreements associated with Funding
Sources and current TPAs' if any - Adoption Agreement
- Basic Plan Document associated with the Adoption
Agreement - Summary Plan Description
- All amendments to the plan
- Loan policy if the plan provides for loans
- Most recent valuation
- Prior years annual report including compliance
testing - Last three years IRS Form 5500 reports and
related schedules - Employee Census which includes
- Social Security Number
- Name
- Sex
- Date of Birth
- Date of Hire
- Compensation mode frequency
24 25- Benefit Retirement Services, LLC
- 119 3rd Ave NE
- PO Box 757
- Independence, IA 50644
- Toll free 1-800-899-8371 or (319) 334-2479
- cmenken_at_indytel.com or jhalpin_at_indytel.com
26U-4/U-5 Updates
- NASD continues to emphasize timely updates
- Representatives have a continuing obligation to
keep the information disclosed in their
respective Form U-4s current by reporting, in
writing, any updates or changes to the
information previously reported. Amendments to
the Form U-4 must be filed with the NASD within
30 days of the event that triggers the reporting
requirement. - If in doubt check with Compliance
27Personal Brokerage Account Disclosure Form
- Brokerage and investment accounts
- Disclosure is required
- WSP section 445 for review
28Private Securities Disclosure Form
- Permission required/Disclosure required
- NASD Rule 3040 states
- Prior to participating in any private securities
transaction, an associated person shall provide
written notice to the member with which he is
associated describing in detail the proposed
transaction and the person's proposed role
therein and stating whether he has received or
may receive selling compensation in connection
with the transaction provided however that, in
the case of a series of related transactions in
which no selling compensation has been or will be
received, an associated person may provide a
single written notice. - WSP section 1200
29Business Cards and Stationary
- Recent NASD audit tasked us to improve
- Workman Securities Corporation name and address
must be on cards and letterhead. - Submit samples to Home Office for review and
approval
30Do Not Call List
- Becoming increasingly important from compliance
viewpoint - WSC is member of Do Not Call Registry
- Representative is not to conduct cold calling
without prior permission - Review WSP section 1555
31529 Plans/Municipal Securities
- 529 Plans are classified as municipal fund
securities and are governed by the rules of the
Municipal Securities Rulemaking Board (MSRB) - Must be Series 7 or 52 qualified or if
representatives municipal securities activity is
limited to only transactions in 529 Plans then
Series 6 qualified - Expect more oversight to be forthcoming in the
529 arena - Expect more information in the whole municipal
securities world as well
32Anti-Money Laundering/Clients With Cash
- Regulatory importance cannot be emphasized enough
- Incorporated throughout our WSPs review
sections 1510 and 2700. Special review given to
Money Laundering Red Flags and Know Your
Customer Rules - Much is happening at the Broker Dealer level
ie, FinCEN requests made direct to Broker Dealer,
new account information checked against U.S.
Treasurys Office of Foreign Asset Controls
(OFAC) Specially Designated Nationals and
Blocked Persons (SDN) list, etc.
33New Account Forms
- Time spent here is time well spent
- One of the most important documents NASD auditors
look to for information - Directly connected to AML issues, suitability,
etc. - Representative must sign and date
- Frequency of updates should be addressed
34Medallion Guarantees
- Know as Signature Guarantees
- No Signature Guarantee will be performed without
a fully completed Request for Signature Guarantee
form approved by Home Office - Signature Guarantee is not a notary
- The Guarantor stands behind the transfer and is
liable and responsible if the transfer of
ownership is challenged based upon the signature
guarantee
35Recent RIA Regulatory Developments
- New SEC head Christopher Cox
- SEC is looking at updating Form ADV through the
IARD system, debate continues regarding
differences with States will probably wait for
new SEC head - Email recent action taken against Banc of
America Investment Services for failure to
preserve email information interesting aspect
of this case was that Banc of America utilized a
software vendor to help automate the firms email
compliance program. Unfortunately the system did
not work and the SEC was not sympathetic to this
fact - Disposal of Consumer Report Information as of
July 1 the disposal rule requires investment
advisers that maintain or possess consumer
report information for a business purpose to
take reasonable measures to protect against the
unauthorized access to or use of the information
in connection with its disposal.
36Creative Wealth Strategies
- R. Brook Hanson, CLU, ChFC, AEP
- President Creative Wealth Strategies
- Modern Portfolio Theory
- Reasonable Cost
- Breakpoints based on total assets per rep
37Email/Communication With The Public
- E-Mail Retention
- Rule 17a-4(b)(4) requires broker-dealers to
preserve originals of all communications
received and copies of all communications sent
(and any approvals thereof) by the member, broker
or dealer (including interoffice...) relating to
its business as such, including all
communications which are subject to rules of a
self-regulatory organization of which the member,
broker or dealer is a member regarding
communications with the public
38Email/Communication With The Public
- How Long/How E-mails Need to be Retained
- General Requirement 3 years
- Opening or Maintenance of Account 6 years
- RIAs 5 years (2 years in the office)
- Rule 17a-4(f) states that
- Electronic storage media must preserve the
records in a non-writable, non-erasable format
39Email/Communication With The Public
- Penalties
- Banc of America - 1.5million 6/15/05
- Deutsche, Goldman Sachs, et. al. 8.25 million
- Edward Jones - 75 million (part)
- Jefferson Pilot - 625,000 and censure
- Raymond James failure to supervise
- Schield Management - 175,000 (destroyed)
40Advertising/Sales Literature
- NASD allows some filings via Web-based
application - All communications must be fair, balanced and not
misleading - If in doubt call Compliance
- Provide for sufficient lead time
41Annual Compliance Meeting
- NASD Rule 3010(a)(7) requires each registered
representative participate annually in Compliance
Meeting - Recently completed NASD audit tasked us to
improve - NASD Rule provides Member Firms with flexibility
in implementing Compliance Meeting expect to
see continued changes
42Compliance Audits of Non-Registered Detached Site
Locations
- Recent NASD audit tasked us to improve
- Important audit checklist items
- Safeguarding of customer funds and securities
- Maintaining books and records
- Transmittal of funds between customers and
registered representatives and between customers
and third parties - Validation of customer address changes
- Validation of changes in customer account
information
43Variable Annuity Sales
- NASD concerns regarding unsuitable
recommendations continues to be a priority - Over 80 NASD disciplinary actions in last 2 years
against Member Firms - Recent NASD audit tasked us to look for
- Excessive switching
- Misleading marketing
- Failure to disclose material facts
- Unsuitable sales
- Inadequate training and supervision
- Inadequate written supervisory procedures
- Importance of Switch Letter where appropriate
- Review WSP sections 610 and 615
44Mutual Funds Sales
- NASD priorities continue to be unsuitable
recommendations, breakpoints and B share sales - NASD NTM 04-30 concerned with sales practice
obligations related to sale of bonds and bond
mutual funds - Importance of Switch Letter where appropriate
- Review WSP section 620
45Conclusion
- Closing Remarks
- Final Questions
- Thank You
46Keynote Speaker
- Peter Nyhus, Senior Vice President, American
Funds Service Company