Supervision is lacking at B-Ds, NASAA says
State regulators are seeing fewer problems with variable annuity sales but continue to see violations in some areas…
State regulators are seeing fewer problems with variable annuity sales but continue to see violations in some areas of supervision at broker-dealers, according to a review of 236 exams conducted in the first half.
The top five types of violations include failure to follow written supervisory policies, suitability, correspondence/e-mail, maintenance of customer account information and internal audits, according to the review, released last Sunday at the annual meeting of the North American Securities Administrators Association Inc. in Coronado, Calif.
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States found violations with written supervisory procedures in 24% of exams that they checked for such issues and 20% of the time when they looked at suitability.
Regulators at the state level are concerned that problems are popping up as a result of reductions in compliance resources at brokerage firms.
“We are concerned about [broker-dealers'] having enough staff to service regulatory inquiries and [provide] customer service,” William Reilly, special assistant to the director of Florida's Office of Financial Regulation, said at a meeting of NASAA's broker-dealer section, which was held during the association's annual gathering.
Firms also are skimping on exception reports they buy from their clearing firms, he said.
The Florida regulator warned industry compliance people to make sure that they speak with customers who have a complaint rather than just the broker involved.
In addition, firms need to beef up branch audits and follow up to ensure problems are fixed, Mr. Reilly said.
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