Cordium Webinar: The Do’s and Don’ts of the FINRA Audit Questionnaire - June 9, 2015

April 15, 2023CORDIUM POWERPOINT MASTER 1

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FINRA AUDIT QUESTIONNAIRE: The “Do’s and Don’ts” June 9, 2015

Presented By:John Donegan

Vice President, Broker Dealer & AML Consulting

Cordium

Questions

You can submit your questions using the Questions area in the GoToWebinar console

You can submit your questions using the Questions area in the GoToWebinar console

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Introduction

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o What is the purpose of the questionnaire?

o Why is it important?

o What are the consequences of getting it wrong?

o Things to look out for….

FINRA AUDIT QUESTIONNAIRE – some key tips for some of the more standard questions.

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Questions – key tips

o Organizationalo Provide exact information that matches your Firm’s Organizational

Chart

o Complaintso Take all complaints seriously and provide information on what your

Firm did about the complaint in high detail

o Disclosureo Include any requests by FINRA as the Auditor may not be aware of

inquiries by another division of FINRA

o Research, Radio & Televisiono Attach Compliance Department approvals to the documentations of

investor communications, reports or scripts used to advertise.

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Questions – key tips

o Seminars/Forums and Meetingso Provide all materials prepared for any investment related program

hosted, no matter how small it was

o Jointly Held Accounts – Rep/Customero Have the surveillance account reviews ready to be provided as well

o Rule 144 Stock Accountso Be especially diligent to lower priced securities accounts, margin and

account surveillance

o Discretionary accountso Prepare to provide the following documentation: supervisory review,

POA proof and executed, as well as full and prolonged account history

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Questions – key tips

o U4 Financial Disclosureso Be careful, take noteo When do you have to report – on a Lien from Web CRD

o Felony Disclosureso Answers provided on this question should match any employee

provided disclosure and the registered persons U4

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Questionnaire Questions – diving in a little deeper

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Question: Do you utilize Facebook, Twitter, LinkedIn, YouTube or any other social media/ networking websites (including blogs or forms) for business purposes?

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o Social Mediao LinkedIn, Facebook, YouTube and Twittero Have a policy in place that states what is allowed or

forbidden with each social media sourceo Your Firm should have controls and pre-approval

procedures in place

Question: Do you utilize instant messaging, text messaging, Blackberry messaging, Bloomberg, and/or third-party communication systems (i.e., Yahoo, Gmail, AOL) for business purposes?

o Electronic Communications for Business Purposeso IM, Text, Blackberry, Bloombergo Third party E-mail

o Yahoo, Gmail, AOL, Hotmailo Linked to Bloomberg as secondary e-mails – this should not

be permitted!

o Enforcement action on unauthorized use of personal e-mail or instant messages is high

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Question: Do you communicate or conduct securities business with the public through a non-firm issued device (e.g., iPad, laptop, tablet, smartphone) and/or utilize a non-firm issued wireless network router?

o Cybersecurity / Privacy – SEC RULE 17a -4Fo Use and Encryption of the following:

o Laptop, tablet, smartphone, Wi-Fi, wireless routers, wireless connections, USB thumb drive storage and external hard drive devices

o Policy for lost or stolen deviceso Procedure for how to help your customers with recovery of

assets/sensitive information in case of breacho Insurance Policies for cyber breaches and hackingo Recovery plan

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Question: Do you own, maintain or otherwise control a website?

oPersonal Web SitesoDisclosureoAwarenessoBusiness PurposeoApproval

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Question: Do you conduct business out of any location other than the branch office?

o Alternative Business Locationo This is a newer FINRA Questiono Approval Evidenceo No meetings specifically targeting Seniors or other

specific groups of people

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Question: Are you engaged in any outside employment/activities or private securities transactions?

o Outside Business Activitieso Disclosures and updated to Registered persons must exactly

match information listed on U4o Approval must be evidencedo Updates should be made immediately as the employee discloseso Training and reminders need to be made available to registered

persons with clear definitions of what is and what is not reportable.

o Be especially cautious if individual wishes to engage in an outside business activity involved in financial matters or could be promotional for the representative’s financial business

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Question: In the past 12 months, have you participated in any product-specific sales contests or incentive-based sales programs?

o Sales Contestso Incentive programso Bonus for increased saleso Particular fund group based contesto In house products / inventoryo Deceptive practices

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Question: Do you prepare and/or distribute personalized account statements, consolidated statements or performance reports to customers, separate and apart from the account statements prepared and/or distributed by your member firm?

o Statementso Distributiono Third Partyo Securityo Potential for Fraudo See Madoff Securities case

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Questions and Answers

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