HPAG Compliance News – March 2020
Email Communications & Correspondence
There have been a few questions regarding email communications lately, so here are some reminders of
current policies and procedures.
- If you are sending an email to more than one recipient, that email is considered communication and must be approved through Compliance Max prior to sending, regardless of the content. If the email is a pre-approved LPL communication, you must log the use in Compliance Max using the tracking number.
- Personal email cannot be used for business communications. Occasionally, you might receive a business email from a friend or family member using your personal email address. In that case, you can either forward the message to your approved LPL email address or reply and copy your approved LPL email address, reminding the sender that you are not permitted to use your personal email address for business communications.
- Keep personal information to a minimum in your business email. If you use your business email for personal matters, your personal information becomes a required record of LPL and HighPoint and must be provided to regulators as part of any communication request.
- On a somewhat related note, greeting cards are no longer required to be pre-approved. You need to keep a copy of the card in your correspondence file, along with a list of recipients. If you write a personal note inside the card, you need to keep a copy of each individual card.
- Don’t forget to send correspondence files to HighPoint weekly.
Trade Blotter Alerts – Front Running
Trades for Employee Related accounts must be entered after trades for Non-Related accounts. Related accounts include the accounts of an Associated Person and his/her parents, grandparents, spouse, children, and siblings.
If you have contacted a client with a trade recommendation and are waiting for the client to respond, you must give the client a reasonable amount of time to respond prior to placing a personal or Related trade. Additional details can be found in LPL’s Written Supervisory Procedures, Section 6.3.
If a trade for a Related account is entered prior to a Non-Related account, the trade execution will be evaluated for a potential price swap.
As we complete our annual ADV amendment, we may need additional information from your office. Please keep an eye out for any communications from us. Additionally, we will need your help in updating our client email and mailing address files. We will be reaching out for assistance within the next couple weeks.
Thank you for your business!
HPAG Compliance News – February 2020
LPL Top 10 Audit Deficiencies
One of the ways LPL supports our compliance program is through a monthly OSJ call. During the December call, LPL highlighted the top deficiencies discovered by LPL auditors when visiting branch offices during 2019. This list is not exclusive to HighPoint offices but provides us with useful insight on the audit program and valuable reminders for our own operations. See below for details and contact us if you have any questions or concerns.
1) Existence of a Business Continuity Plan – See below
2) Business Continuity Plan maintenance – See below
3) Business Continuity Plan testing – See below
4) Documentation of annual client meetings – For Corporate advisors, this should be entered electronically. For Hybrid advisors, you must upload the F450.
5) Missing annuity delivery receipts – This has been a common finding in audits for a while, but LPL recently changed their policies for delivery receipts. See the attached FAQ for more information.
6) Brokered CD disclosure – The form F463 must be signed at or before the time of purchase of a brokered CD. The form must be kept in the client file.
7) Unapproved social networking profiles – Business pages must be approved by LPL and archived. Additionally, every individual must have his/her LinkedIn page approved, including NLAs.
8) AOE forms for subsequent purchase – If the original form F439 is not on file, form F439-SP is required for all subsequent purchases.
9) Copies of checks – For the Remote Deposit Program, you must keep a copy of the check in your office. Keep the original for 3 weeks, and then shred it. You do not need to print the cover sheet.
10) Laptop encryption
Additionally, LPL provided the top 5 deficiencies that were escalated in 2019.
1) Document signature policy violations – If a document has been executed, changes must be struck through and initialed. Additionally, you are not permitted to have clients pre-sign blank forms.
2) Email policy violations – You are prohibited from using any outside email address for business use.
3) Failure to document annual client meetings
4) Annuity Order Entry violations
5) Personally Identifiable Information violations
Business Continuity Plans
Each branch office must have a current BCP, and your BCP must be updated and tested every year or as changes occur. To test your plan, you will need to work from your backup office location, ensure you can access files stay in contact with clients, and maintain security of information. Document your review on the testing rubric at the end of the BCP template. If you identify any deficiencies, document the changes made to your BCP. Your BCP must be sent to HighPoint for signature. As you can see from the above list, this is a major focus of LPL’s audit department and an important component to our compliance program.
Thank you for your business!
February 7, 2020
HPAG Compliance News – January 2020
New Employee Documentation
When a new employee is hired in your office, you are currently filling out the LPL forms to add a new advisor or NLA. In addition, please provide HighPoint with the New Covered Person Form (attached to email). This will allow us to obtain the required registration and certification details to meet our compliance obligations. Please send all new advisor/NLA documents to me going forward. I will notify LPL and ensure our HPAG files are updated with the new information.
Once we receive these forms, we will be sending the individual a link to the AdvisorAssist new employee questionnaire. These are secure links, so the information will be protected. The questionnaire and all required certifications are due no later than 10 days after the date of employment, per SEC rules and regulations. Failure of an employee to complete the forms or failure of an office to submit the New Covered Person Form prior to the date of employment will result in disciplinary action.
Code of Ethics Certifications
The Advisors Act requires each individual to certify to certain information within 10 days of hiring and within 30 days of quarter end. The quarterly certifications are sent on the first day of the new quarter, so you have 30 days to complete them. We will send a couple reminders about certification due dates, but ultimately, you are responsible for ensuring your certifications are completed within the required time frame. Due to the importance of these certifications, HighPoint will be using the following escalation system for missed or late certifications:
1st offense: Letter of warning to employee
2nd offense: Letter of warning to branch
Additional offenses: Discipline determined by HighPoint, up to and including fines or termination
As you are aware, we are now using AdvisorAssist to facilitate the distribution and collection of required certifications. If you are not receiving those emails, you are responsible for adding @advisorassist.com to your allowed senders list. Instructions on how to do that are attached on the Quick Guide to Proofpoint. There will be no due date exceptions granted for failure to add the domain to the allowed senders list.
Historical Certifications and Statements
We have identified some historical certifications that have not been completed, so we will be reaching out to obtain those required documents. You should not backdate the signatures on these certifications. Further instructions will be sent with specific requests for information.
Please be on the lookout for these communications. I recognize these certifications are not always at the top of your to-do list, but maintaining clean compliance files is a major factor in reducing our regulatory risk. We appreciate your partnership and are committed to providing you with the strong compliance program your business deserves.
Thank you for your business!
January 10, 2020