BOSTON COMPLIANCE ROUNDTABLE SEMINAR
Mutual Fund
Distributor
Compliance Officer
Roundtable
April 30, 2014
Today’s Panelist
Kenneth G. Juster
Partner
Steve Price
Vice President Deputy CCO
Chih-Pin Lu
Managing Attorney
Asset Management Group
Nick Prokos
Partner
Michael Mahoney
CCO
John Hancock Funds, LLC
Tamara Salmon
Senior Associate Counsel
Michael W. McGrath, FFA
Partner
2
Discussion Topics
• Regulatory Exams and FINRA Exam Priorities
• Alternative Products Distribution/Marketing
• Intermediary Oversight Update
• FINRA Rulemaking and Guidance Update
3
Regulatory Exams and FINRA Exam
Priorities
• FINRA Exam Topics
– Cybersecurity
– Internal and external wholesaler (non-employee
relationships)
– Email supervisory reviews
– IRA
4
Regulatory Exams and FINRA Exam
Priorities
• Retrospective Rules Project
‒ Gifts and gratuities and non-cash comp rule set
•
•
FINRA Rule 3220 (Influencing or Rewarding Employees of
Others)
FINRA Rule 2830(I)(5) (Investment Company Securities)
‒ Communications with the public
•
•
•
FINRA Rule 2210 (Communications with the Public)
FINRA Rule 2212 (Use of Investment Company Rankings in
Retail Communications)
FINRA Rule 2213 (Requirements for the Use of Bond
Mutual Fund Volatility Ratings)
5
Alternative Products
Distribution/Marketing
• ALPS Distributors, Inc. (Apr. 22, 2013)
FINRA Advertising Interpretive Letter
‒
‒
‒
‒
Use of pre-inception index performance
Institutional communications only
Exchange Traded Products use only
Current discussion for Open-end use?
6
Intermediary Oversight Update
• Report on Conflicts of
Interest
‒ Due-diligence of intermediary
‒ Know your distributor concept for
complex products
‒ FINRA Communication Rule 2210
• SEC Distribution in Guise
7
FINRA Rulemaking and Guidance
Update
• New Rules 3110 and 3120
‒ Replace NASD Rules 3010 and 3012
‒ Effective December 1, 2014
‒ Key Changes:
• Risk-based reviews of transactions
• Risk-based reviews of correspondence and internal
communications
• Supervision of Supervisory Personnel
• Conflicts of Interest
• Insider trading reviews/Reporting of internal investigations
• Expanded supervisory controls report for firms with >$200 million
in gross revenue
8
FINRA Rulemaking and Guidance
Update
• New FINRA Rule 3110(b) – Email
Review
–
–
–
–
Internal communications of all associated
persons
Risk based approach (lexicon-based vs.
exception-based) screening
Supervisor “is responsible for any deficiency in
the system’s criteria that would result in the
system not being reasonably designed”
May delegate review to non-registered persons;
principal retains responsibility of performance
9
Open Forum and Discussion
10
BOSTON COMPLIANCE ROUNDTABLE SEMINAR
Thank you to our
panelists and
attendees.
April 30, 2014