Registration Is Not the End of the Road, It is the Beginning of the Journey

If you are the Chief Compliance Officer for a broker-dealer and a registered investment advisor keep reading.

During 2011, one within the last month, the SEC has taken action against two dually registered broker dealer/investment advisers for failure to have adequate written supervisory policies and procedures, compliance manuals and code of ethics for the advisory side of their business. In one case the CCO was named for aiding and abetting.

In both cases  ( Wunderlich Securities Inc., Tracy L. Wiswall and Gary Wunderlich Rel. 34-64558;  Feltl & Company Rel. 34-65838 the SEC refers to Adviser Act Rule 206(4)-7 which requires that every registered investment advisor have in place written policies and procedures designed to prevent violations of the Advisers Act. In addition under 206(4)-7, the adviser is also required to at least annually review the adequacy of the policies and procedures.

Wunderlich and Feltl were using “off the shelf” compliance manuals, to the extent that had any manuals.  Feltl’s consisted of four pages at the end of the broker dealer manual.  As for the annual review Wunderlich hired a consultant to review the compliance program and then held onto the report and recommendations for six months without acting on it.

Both firms have settled with the SEC and have undertaken to hire an independent compliance consultant to review the manuals and written supervisory procedures.

What are some of the specific take aways from these two matters?

  •  If you have one entity with dual registration or two affiliated entities you do need separate compliance programs appropriate to the rules and regulations related to the business.


  •  “Off the shelf” compliance manuals do not work. If you buy one use it only as a template.


  • If you are not going to follow the recommendations of a consultant or attorney do not hire them. A report with recommendations must be followed up on.


  • Registration is not the end of the road. It is just the beginning. On the day your registration goes effective you need to have a full compliance program ready to go.


© December 2011 by Sharon M. Davison, it may be shared with attribution.

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