Boston Compliance Roundtable Seminar
April 11, 2012
Broker-Dealer Roundtable
John Hancock
Funds, LLC
Michael J Mahoney
Chief Compliance Officer
Raymond James
Financial, Inc. Asset
Management Group
Chih-Pin Lu
Managing Attorney
Tamara Salmon
Senior Associate Counsel
Kenneth Juster
Associate
Nick Prokos
Partner
Francois Cooke
Managing Director
Table of Contents
• Introduction
• Transfer Agent & Distributor Interaction
• Missing Securityholder Requirements
• Series 99 Implications
• Regulatory Focus Areas
2
COMPLIANCE ROUNDTABLE
BOSTON, MA
Introduction
• Roundtable logistics
• Panel introductions
• Context of different viewpoints of panel
3
COMPLIANCE ROUNDTABLE
BOSTON, MA
Transfer Agent &Distributor
Interaction
House Accounts and Orphan Accounts:
•Consent Letters: Is the TA or the Distributor sending
letters to the accounts when they are being transferred
as direct accounts to the Funds?
•Account Association with the Dealer: Is the distributor
name no longer associated with the
account on the
TA records?
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COMPLIANCE ROUNDTABLE
BOSTON, MA
Transfer Agent &Distributor
Interaction
House Accounts and Orphan Accounts
•Account Types: Other than fully disclosed
accounts/dealer controlled accounts, should there be
others?
•Fees: are distributor’s still collecting loads and 12b-1
fees? What about shareholder
services fees from the Fund
Administrator?
5
COMPLIANCE ROUNDTABLE
BOSTON, MA
Transfer Agent &Distributor
Interaction
Other areas where the transfer agent interacts with the
distributor:
• Providing statements
• Recordkeeping issues
• Account coding
• Indirect compensation
• Tracking of information
• Handling of complaints
• Are written complaints from a broker-dealer alleging a
grievance involving activities of a distributor’s
wholesaler covered under FINRA Rule 4530?
6
COMPLIANCE ROUNDTABLE
BOSTON, MA
Missing Securityholder
Requirements
Considerations for missing securityholders:
• Summary of transfer agent requirement that will
apply to broker-dealers
• Challenges in identifying lost shareholders and steps
to take to find them
• Once lost, what needs to be done
• Connection of lost shareholder identification with
escheatment process
7
COMPLIANCE ROUNDTABLE
BOSTON, MA
Series 99 Implications
FINRA’s new operations professional license may
have implications for distributors.
• Background
• What departments or positions have MF distributors
looked to for assessing whether personnel should be
series 99 licensed?
8
COMPLIANCE ROUNDTABLE
BOSTON, MA
Regulatory Update
A number of new regulatory requirements or changes
are occurring, but how do they impact distributors?
•
•
•
•
FINRA Examination Priorities applicable to distributors
FINRA Risk Assessment Survey experiences
Global Distributors - FINRA’s reach
Compliance Testing Considerations
• What topics are covered? Are 12b-1 and
load payments covered? Operational
oversight of 2830(d) excessive fee
monitoring? What else should be
covered?
9
COMPLIANCE ROUNDTABLE
BOSTON, MA
Regulatory Update
• Communication reviews and recordkeeping (email,
social media, etc.); and new FINRA rule proposal.
• Impact of FINRA’s suitability rule on wholesalers.
• Compensation Structures - Producing Manager
under 3012 for wholesaling activity:
• Regulatory background
• Consideration of when a wholesaler may be considered a
Producing Manager
10
COMPLIANCE ROUNDTABLE
BOSTON, MA
Boston Compliance Roundtable Seminar
April 11, 2012
Broker-Dealer Roundtable
John Hancock
Funds, LLC
Michael J Mahoney
Chief Compliance Officer
Raymond James
Financial, Inc. Asset
Management Group
Chih-Pin Lu
Managing Attorney
Tamara Salmon
Senior Associate Counsel
Kenneth Juster
Associate
Nick Prokos
Partner
Francois Cooke
Managing Director
Francois Cooke
Francois Cooke
Managing Director
ACA Compliance Group
1900 NW Corporate Blvd
Suite 200W
Boca Raton, FL 33431
Office: (561) 988-3310
Fax: (561) 988-3305
Cell: (954) 699-4186
fcooke@acacompliancegroup.com
www.acacompliancegroup.com
Francois Cooke is a Managing Director for the Broker-Dealer Services
Division of ACA Compliance Group (ACA). Francois is responsible for the
day-to-day operations of the broker-dealer services of ACA which include
mock regulatory examinations, compliance risk assessments and testing,
preparation and reviews of policies and procedures, new membership and
continuing membership applications with FINRA, and development of
enterprise compliance programs.
François has over 20 years of experience with broker-dealers, investment
advisers, and transfer agents. Francois led the securities segment of the
Financial Services Regulatory Practice as a partner of a Big 4 accounting
firm where he was employed for over 8 years.
Francois was previously a Vice President of a nationally recognized
consulting firm where, over a 3-year period, he conducted and managed a
variety of engagements with broker-dealers and investment advisers. He
served with the SEC for 5 years where he performed numerous
examinations of broker-dealers, investment advisers and transfer agents
becoming one of the senior staff accountants in the Southeast Regional
Office in Miami, FL. Prior to the SEC, he was with the NASD for 3 years
as an examiner in the NASD’s Philadelphia District Office conducting
examinations of broker-dealers, preparing manual monthly financial
analysis of FOCUS Reports, and participating in Pre-Membership
Interviews. He began his tenure with the NASD as an Advertising Analyst.
Francois has expertise with financial and operational regulatory
requirements, sales practice monitoring and surveillance controls, design
and development of compliance and supervisory frameworks, and
mitigating trading regulatory risks for both fixed income and equity
products. Francois also understands the unique environments of bankbroker-dealers, private placement agents, foreign affiliated broker-dealers,
mutual fund distributors, self-clearing operations, dually registered
investment advisers and broker-dealers, and has conducted many due
diligences on broker-dealers representing both buyers and sellers.
Francois has spoken at industry conferences including multiple speaking
engagements for the Securities Industry and Financial Markets Association
- Internal Audit Division Conference on: Supervisory Internal Controls, IT
Compliance, and Auditing Broker-Dealers. Francois has an M.B.A. from
the University of Virginia, and a B.S. in Communications from Cornell
University. He currently is an active Certified Anti-Money Laundering
Specialist (“CAMS”).
Kenneth G. Juster, Esq.
AREAS OF PRACTICE
BOSTON OFFICE
617.261.3296
TEL
617.261.3175
FAX
ken.juster@klgates.com
Mr. Juster is an associate in the investment management group, resident in the Boston
office. He focuses his practice on advising clients in the financial services industry,
including private domestic and offshore investment funds, broker-dealers, investment
advisers and registered funds. Mr. Juster advises clients on SEC and FINRA
regulatory requirements, Investment Company Act, Investment Advisers Act,
Exchange Act and SRO compliance issues, including Section 28(e) “soft dollar”
compliance, development of supervisory procedures and overall compliance reviews.
He counsels broker-dealers, advisers and fund clients in connection with their prime
brokerage arrangements, Master Repurchase Agreements and other derivatives-related
transactions. Mr. Juster also advises clients with respect to transactional matters,
including the structuring and distribution of equity securities, hedge funds, private
equity funds and funds of funds.
PROFESSIONAL BACKGROUND
Prior to joining K&L Gates, Mr. Juster was regulatory counsel for a large retail
broker-dealer where he was responsible for advising the compliance, operations and
trading departments on federal and state securities laws and SRO rules, and managing
SEC, FINRA and state investigations and examinations. Previously, Mr. Juster was
assistant general counsel of an institutional broker-dealer where his practice focused
on legal and regulatory compliance, domestic and international brokerage
relationships, energy and FX brokerage, soft dollars and electronic trading. Mr. Juster
also spent three years as head of compliance at an institutional broker-dealer in New
York, where he was responsible for all aspects of legal and regulatory compliance
related to the trading of equities, municipal bonds and other fixed income instruments,
and derivative products. In these roles, Mr. Juster gained extensive experience with
soft dollar compliance, including secondary clearing, commission sharing and
introducing broker arrangements.
Prior to his in-house counsel and compliance roles, Mr. Juster spent four years as the
executive director of The Asset Managers Forum, an affiliate of the Securities
Industry and Financial Markets Association, which serves as the principal advocate
for the investment management industry on securities processing, accounting policy
and related matters. Mr. Juster was responsible for developing and advancing the
Forum's policy positions and coordinating the efforts of the forum’s various working
groups and committees. He also served as the forum’s spokesman at industry events
in the United States and Europe and liaison to government regulators and the press.
PROFESSIONAL/CIVIC ACTIVITIES


Massachusetts Bar Association
New York Bar Association
BAR MEMBERSHIPS
Massachusetts
New York
EDUCATION
J.D., Fordham Law, 2005 (cum laude)
B.A., University of Notre Dame, 1998
Chih-Pin Lu
Managing Attorney for the Asset Management Group
Chih-Pin Lu is the Managing Attorney for the Asset Management Group of Raymond James
Financial, Inc., headquartered in St. Petersburg, Florida. As in-house counsel, he routinely deals
with corporate, regulatory, and compliance issues related to the firm’s investment advisor,
investment company, and hedge fund businesses. Prior to joining Raymond James, Mr. Lu was
a securities transactions and litigation attorney in private practice, and Senior Counsel
(Enforcement) with the U.S. Securities and Exchange Commission’s Southeast Regional Office.
During his tenure with the SEC, he received an appointment as a Special Assistant United
States Attorney. Formerly, he represented clients in complex financial fraud cases as an
Assistant Federal Public Defender. Mr. Lu graduated from Tufts University and received his law
degree from Boston College Law School.
Michael J. Mahoney
Chief Compliance Officer
Mike is the Chief Compliance Officer of John Hancock Funds, LLC, the wholesale distribution
broker dealer for the John Hancock family of open end mutual funds. His primary responsibilities
include, but are limited to, the planning and execution of the firm’s compliance program;
compliance training; review and revision of procedures; testing of procedures and controls;
licensing of the firm and individual associates; review, principal approval and filing of sales
material and; compliance support of the wholesale sales team. He has been held this position
since 2006.
Mike has previously held various compliance and operations related positions at
Commonwealth Financial Network (1997-2006), Linsco/Private Ledger (1995-1997), John
Hancock Distributors (1992-1995) and, Keystone Mutual Funds (1987-1992). Mike is currently a
FINRA District Committee member for District 11.
Nicholas J. Prokos
Nicholas J. Prokos
Partner
ACA Compliance Group
1900 NW Corporate Blvd
Suite 200W
Boca Raton, FL 33431
Office: (561) 988-3310
Fax: (561) 988-3305
nprokos@acacompliancegroup.com
www.acacompliancegroup.com
Nick Prokos is a Partner at ACA. Nick joined ACA in 2002 to enhance the
firm’s investment company, hedge fund and anti-money laundering
compliance consulting services. ACA’s Investment Company Services
division performs a variety of independent regulatory compliance
engagements and risk control reviews with many mutual fund complexes,
insurance companies and fund service providers including transfer agents
and mutual fund distributors.
Nick brings to ACA’s clients his regulatory experience from the U.S.
Securities and Exchange Commission and as an industry consultant with
one of the “big 4” accounting firms. Nick began his compliance career with
nearly four years as an Examiner and Staff Accountant at the SEC’s New
York Regional Office. While working at the SEC, Nick was primarily
involved with the examination of investment companies, variable insurance
products, transfer agents and business development companies. Prior to
joining ACA, Nick spent two and a half years as a Principal Consultant in
the Investment Management Regulatory practice at
PricewaterhouseCoopers in New York on a variety of engagements in the
areas of compliance and risk management consulting for the investment
management, banking and insurance industry.
Nick represents ACA through his continuous public speaking at industry
conferences on mutual fund and anti-money laundering topics, and is
sought after by investment management media publications for his
commentary and insight of regulatory matters. Nick graduated with
honors from St. John’s University, New York, with a B.S. in Finance and
where he subsequently received his MBA.
Tamara K. Salmon
Senior Associate Counsel
Tamara K. Salmon is Senior Associate Counsel of the Investment Company Institute (ICI). In
her capacity with the ICI she handles a variety of state and federal legal and regulatory issues
relating to mutual funds, 529 plans, broker-dealers, and investment advisers. Her
responsibilities at the Institute include being the staff person responsible for the Chief
Compliance Officer (“CCO”) Committee, the Compliance Advisory Committee, the Internal Audit
Advisory Committee, the Risk Management Committee and its Advisory Committee, and the
529 Plan Advisory Committee. She also provides support services to committees within the
Operations Department including, among others, the Operations Committee, the Small Funds
Committee, the Technology Committee, and the Transfer Agent Advisory Committee.
Prior to joining the Institute in 1993, she served as Assistant Director of the Florida Division of
Securities. In her eight years with the Division, she oversaw the Division’s registration and
examination functions, filed and settled enforcement proceedings, testified frequently as an
expert witness, drafted and analyzed statutory and rule changes, and handled various cabinet
issues for Florida’s Comptroller. Prior to joining the Division, she was an attorney with the
Commerce Committee of the Florida House of Representatives, where her duties included
drafting and analyzing legislation relating to the financial services industry.
She graduated magna cum laude from Salem Women’s College and magna cum laude, Order
of the Coif, from Florida State University College of Law. She is a member of the Florida,
District of Columbia, and U.S. Supreme Court Bar Associations as well as of the American Bar
Association.