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2016 Financial Industry Regulatory Authority, Inc. All rights
reserved. 1
Prioritizing Limited Resources: What You Need to Know Thursday,
November 10 1:45 p.m. 2:45 p.m. Do you ever wonder how some small
firm business owners manage their compliance requirements and still
have time to have a successful practice with limited staff? Join
FINRA staff and industry panelists as they share how they stay
informed of regulatory changes and limit risk exposure, and provide
tips and techniques they use to get the job done with limited
resources. Moderator: David Greene District Director FINRA Los
Angeles District Office Panelists: Nicholas Cochran Vice President
American Investors Company Donna DiMaria Principal, Chief Executive
Officer, and Chief Compliance Officer Tessera Capital Partners, LLC
Carolyn May Compliance Consultant Smith, Brown & Groover,
Inc.
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2016 Financial Industry Regulatory Authority, Inc. All rights
reserved. 2
Prioritizing Limited Resources: What You Need to Know Panelist
Bios: Moderator: David Greene is District Director of FINRAs Los
Angeles District 2 Office. He served in the same role at NASD
before its 2007 consolidation with NYSE Member Regulation, which
resulted in the formation of FINRA. In his capacity as District
Director, Mr. Greene oversees the sales practice oversight process
of FINRA-regulated securities firms based in District 2, as well
their employees, with responsibility for ongoing surveillance,
examinations and investigations. In January 2000, Mr. Greene joined
FINRA (then NASD) as a regional counsel for FINRAs Enforcement
Department, and was based in the Los Angeles District Office. For
two-and-a-half years preceding his appointment as Director, Mr.
Greene served as the Deputy Regional Chief Counsel, FINRA
Enforcement Western Region, where his responsibilities included
managing enforcement attorneys in FINRA district offices of Los
Angeles, San Francisco, Denver and Seattle; developing and
overseeing FINRAs national non-summary proceedings programs; as
well as his own enforcement docket. Among the significant cases Mr.
Greene handled were those involving mutual fund share classes,
gifts and gratuities, market timing, brokered certificates of
deposit, sales practice violations and operational compliance
issues. Prior to joining FINRA, Mr. Greene was associated with a
law firm in Los Angeles for 10 years. Mr. Greene received his
undergraduate degree from Pepperdine University and his law degree
from Southwestern University School of Law. Mr. Greene is licensed
to practice law in California, and is admitted to practice before
various federal courts. He is an executive committee liaison of the
Los Angeles County Bar Association Business & Corporations Law
Section and is frequently a speaker at securities industry events.
Mr. Greene is also designated as a Certified Regulatory and
Compliance Professional through the FINRA Institute at Wharton.
Panelists: Nicholas C. Cochran is Vice President of American
Investors Company, a FINRA member firm and registered investment
adviser. Mr. Cochran served as President of the Alliance of
Independent Broker-Dealers, a non-profit, mutual benefit
corporation dedicated to the review and research of investment
offerings, from 1998 through 2012; and also served as an elected
Director of the National Association of Independent Broker-Dealers
(NAIBD), an organization dedicated to small firm advocacy, from
2003 through 2010. Additionally, Mr. Cochran was elected to a
four-year term on the Securities Industry/Regulatory Council on
Continuing Education in 2009 and was elected Chair in 2012. Mr.
Cochran had previously served on FINRAs Continuing Education
Content Committee from 2004 through 2009. He served on the NASDs
National Nominating Committee from 2001 through 2007, and was a
member of NASDs Board of Governors in 1999 and 2000. Additionally,
he was elected to the NASDs National Adjudicatory Council in 1998
and served as Chair in 1999 and 2000. Mr. Cochran also served as an
elected member of NASD District 1 Committee from 1994 through 1996,
was elected Chair in 1996 and was appointed to an additional
one-year term in 2002. He has previously served three separate
elected terms on the District 1 Nominating Committee, serving one
term as Chair. Before joining American Investors Company in 1992,
Mr. Cochran was President of the NASD member firm Equity
Engineering, Inc., and in 1990 founded Nicholas C. Cochran &
Associates, an investment planning and asset supervisory firm. In
addition to his experience in the securities industry, Mr. Cochran
has served as the Board Vice Chair and Finance Committee Chair at
the Pacific Graduate School of Psychology, Vice President of
Finance at the University of Phoenix, Corporate Accounting Manager
for Raychem Corporation, Controller for Behavioral Research
Laboratories and Senior Accountant for Price Waterhouse & Co.
Mr. Cochran holds a CPA certificate and earned a bachelors degree
from San Jose State University. Donna DiMaria, Principal, CEO and
CCO, launched Tessera Capital Partners, LLC (Tessera) in March
2004. Tessera is an independent third party marketing firm
representing both traditional and alternative investment strategies
to institutional investors and financial intermediaries. The firm
is a member of FINRA and SIPC. Tessera also operates as a State
Registered Investment Adviser and is registered as a Municipal
Advisor with the SEC and MSRB. Ms. DiMaria is the founder of the
firm and serves as the companys CEO and CCO. In this role she
oversees the firms compliance function and handles all of Tesseras
due diligence. Prior to Tessera, Ms. DiMaria was the Director of
Consultant Relations at WestAM where she also oversaw the firms
marketing support functions. Prior to joining WestAM, Ms. DiMaria
was a Vice President at Forstmann-Leff International where she was
responsible
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2016 Financial Industry Regulatory Authority, Inc. All rights
reserved. 3
for US Consultant Relations and Institutional Sales. Before
Forstmann-Leff, she was a Marketing Analyst and Fixed Income
Product Specialist at UBS Asset Management. Prior to moving her
career to the investment management industry, Ms. DiMaria was
employed as an Investment Banking Analyst at Kidder Peabody and a
MBS/ABS Accountant at Prudential Securities. Ms. DiMaria received a
Bachelor of Science degree with a concentration in Finance from
Binghamton University in May 1988. She graduated as a Stern Scholar
with a Masters of Business Administration degree in Finance in May
1999 from NYUs Leonard N. Stern School of Business. Ms. DiMaria is
the Chairman and Treasurer of the Third Party Marketers Association
(3PM), she was also formerly the President of 3PM, a position she
held for more than 5 years. She currently sits on FINRAs Membership
Committee, is a member of the National Society of Compliance
Professionals (NSCP), and a member of Beta Gamma Sigma, the premier
honor society recognizing academic excellence in business studies.
She holds the Series 7, 24, 63, 65, 79 and 99 licenses and recently
sat for the Series 50 pilot examination. Carolyn R. May currently
serves as a Compliance Officer for Smith, Brown & Groover,
Inc., a full service retail broker dealer in Macon, GA. Prior to
her association with SBG, Ms. May served as Senior Vice President
and Chief Financial Officer of Simmons First Investment Group,
Inc., a bank-affiliated, full service Broker Dealer in Little Rock,
Arkansas. In addition Ms. May has been a Compliance Consultant to
Broker Dealers, Investment Advisors, CPAs and attorneys for over 30
years. Her industry experience includes acting as Chief Compliance
Officer and Chief Financial Officer for several regional and local
small firms (both self-clearing and introducing). She has received
her Certified Securities Compliance Professional (CSCP)
certification through the program offered by the National Society
of Compliance Professionals (NSCP). She has served as the Southern
Regional Representative to FINRAs District 5 Committee as well as
on FINRAs Small Firm Advisory Board; the District 5 Committee from
2003 2005 (acting as Vice Chairman and Chairman of the Committee);
the Regional Nominating Committee for the South Region from 2004
2005; the District Nominating Committee from 2006 2007 (served as
Chairman); the National Advisory Council (2005) and the
Consultative Committee (2006 2007). In addition to committee
service, she has been an instructor/developer for several NASD (now
FINRA) Seminar Programs and has been an instructor for the Wharton
NASD Institute for Professional Development. She has also served on
various panels for FINRA Regional and National Firm Conferences and
NSCP Regional and National Conferences. Ms. May has been a member
of NSCP (National Association of Compliance Professionals) since
1989 (she served as Secretary of the Board of Directors from 1992
1994) and is a member of the SIFMA Compliance and Legal Division.
Ms. May sits on the Board (Secretary) of the Arkansas Compliance
Professionals Network (ACPN). She also has served as Chairman of
the Board of the National Association of Independent Broker Dealers
(NAIBD), a small firm advocacy group.
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Small Firm ConferenceNovember 9-10, 2016 Phoenix, AZ
Prioritizing Limited Resources: What You Need to Know
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FINRA Small Firm Conference 2016 FINRA. All rights reserved.
Moderator David Greene, District Director, FINRA Los Angeles
District
Office PanelistsNicholas Cochran, Vice President, American
Investors
CompanyDonna DiMaria, Principal, Chief Executive Officer, and
Chief
Compliance Officer, Tessera Capital Partners, LLCCarolyn May,
Compliance Consultant, Smith, Brown & Groover,
Inc.
1
Panelists
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AML Procedures Updating FINRA Template FinCEN Notices
Dealing with RIAs and Funds SEC No Action Letter
Using Checklists and Tools Verification of Entities, Investor
Due Diligence, Client Screening
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Low / No Cost Solutions Affects all areas of firm
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Diminished CapacityClients
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Rule 3270.01 Roadmap for OBA Compliance Multiple OBAs due to
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Transactions
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compliance areaUse checklists and tools
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SEC RIA No Action Letter Extension of No Action Letter Identity
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Home | Previous Page
February 12, 2004
Mr. Alan SorcherVice President & Associate General
CounselSecurities Industry Association1425 K Street, N.W., 7th
FloorWashington, DC 20005-3500
Re: Financial Recordkeeping and Reporting of Currency and
ForeignTransactions / Broker-Dealer Customer Identification
Rule
Dear Mr. Sorcher:
I am writing in response to your letter of January 6, 2004,
concerning thereliance provisions in the new broker-dealer customer
identification rule("CIP Rule").1 Specifically, you have asked
whether the staff of the Divisionof Market Regulation would
recommend to the Securities and ExchangeCommission ("Commission")
that enforcement action be taken if broker-dealers treat registered
investment advisers ("advisers") as if they weresubject to an
anti-money laundering program rule under 31 U.S.C. 5318(h)("AML
Rule") for the purposes of paragraph (b)(6) of the CIP Rule.2
I understand the following facts are pertinent to your question.
On April 29,2003, the Commission issued the CIP Rule jointly with
the Treasury3 underSection 326 of the Uniting and Strengthening
America by ProvidingAppropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001(USA Patriot Act).4 The rule is
codified in 31 CFR Part 103,5 which containsregulations under the
Bank Secrecy Act ("BSA").6 Commission Rule 17a-87
requires broker-dealers to comply with applicable BSA
regulations,including the CIP Rule.8
The CIP Rule requires brokers-dealers to implement customer
identificationprograms that contain the following elements: (1)
procedures for verifyingthe identities of customers, (2) procedures
for maintaining records of theverification process, (3) procedures
for comparing customers with lists ofknown or suspected terrorists
or terrorist organizations, and (4) proceduresfor providing
customers with notice that information is being collected toverify
their identities.9
Paragraph (b)(6) of the CIP Rule permits broker-dealers to rely
on certainother financial institutions to undertake the required
elements with respectto shared customers.10 The rule permits such
reliance if, among otherthings, the other financial institution is
subject to an AML Rule andregulated by a Federal functional
regulator. Paragraph (b)(6) also requiresthat the reliance be
reasonable under the circumstances and that therelied-on financial
institution enter into a contract requiring it to certifyannually
to the broker-dealer that it has implemented an
anti-moneylaundering program, and that it will perform (or its
agent will perform)specified requirements of the broker-dealer's
customer identificationprogram. The reliance provisions are
designed to permit two financialinstitutions with mutual customers
to reach agreements between
Securities Industry Association: No-Action Letter dated February
12, 2004
https://www.sec.gov/divisions/marketreg/mr-noaction/sia021204.htm
1 of 3 10/25/16, 12:22 PM
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themselves as to how they should allocate performance of the
requirementsof the rule and, thereby, rely on one another to avoid
unnecessaryduplication of efforts with respect to a given
customer.
You state that the interrelationship between broker-dealers and
advisers isthe type of situation intended to be covered by the
reliance provisions. Inparticular, you point out that advisers have
the most direct relationshipwith the customers they introduce to
broker-dealers and, therefore, are inthe best position to perform
some of the requirements of the CIP Rule. Youpoint out that the
advisers typically are authorized to direct securitiestransactions
in a securities account opened in the name of the customer ata
broker-dealer.11 You also note that some advisers, for
competitivereasons, may be hesitant to give broker-dealers direct
access to theircustomers. You report that some advisers have
implemented AML programsand will agree to enter into reliance
contracts. You argue that broker-dealers will incur unnecessary
compliance costs if they are not permitted torely on advisers.
Because these advisers are registered with the Commission, they
meet therequirement that the relied-on financial institution be
regulated by aFederal functional regulator. However, they are not
currently subject to anAML Rule and, consequently, do not meet this
condition of paragraph (b)(6)of the CIP Rule. On April 28, 2003,
the Financial Crimes EnforcementNetwork (FinCEN), Department of the
Treasury, proposed an AML Rule forregistered investment advisers.12
Final rules have not been adopted. Youhave asked that
broker-dealers be permitted to treat registered investmentadvisers
as if they are subject to an AML Rule for the purposes of
paragraph(b)(6) of the CIP Rule. If such relief is granted and
Treasury ultimatelydecides not to issue an AML Rule for advisers,
you ask that broker-dealersbe permitted to continue relying on
advisers under paragraph (b)(6) untilthirty days after Treasury
publicly announces such a decision.
Based on the foregoing, the Division staff will not recommend
enforcementaction to the Commission under Rule 17a-8 if a
broker-dealer relies on aninvestment adviser, prior to such adviser
becoming subject to an AML Rule,provided all the other requirements
and conditions in paragraph (b)(6) ofthe CIP Rule are met, namely
that: (1) such reliance is reasonable underthe circumstances; (2)
the investment adviser is regulated by a Federalfunctional
regulator; and (3) the investment adviser enters into a
contractrequiring it to certify annually to the broker-dealer that
it has implementedan anti-money laundering program, and that it
will perform (or its agentwill perform) specified requirements of
the broker-dealer's customeridentification program. This letter is
withdrawn without further action on theearlier of: (1) the date
upon which an AML Rule for advisers becomeseffective, or (2)
February 12, 2005.
This is a staff position with respect to enforcement only and
does notpurport to express any legal conclusions. It may be
withdrawn or modifiedif the staff determines that such action is
necessary to be consistent withthe BSA and in the public
interest.
Sincerely,
Annette L. NazarethDirector
Securities Industry Association: No-Action Letter dated February
12, 2004
https://www.sec.gov/divisions/marketreg/mr-noaction/sia021204.htm
2 of 3 10/25/16, 12:22 PM
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1 31 CFR 103.122.
2 Sections 203 and 203A of the Investment Advisers Act of 1940,
and therules promulgated thereunder, govern which investment
advisers mustregister with the Commission.
3 Customer Identification Programs for Broker-Dealers,
Securities ExchangeAct of 1934 Release No. 47752 (April 29, 2003),
68 FR 25113 (May 9,2003) (CIP Rule Final Rule Release).
4 Pub. L. 107-56.
5 31 CFR 103.122.
6 31 U.S.C. 5311 et seq.
7 17 CFR 240.17a-8.
8 The CIP Rule applies to all "broker-dealer[s]" as defined in
paragraph(a)(2) of the rule. Under the definition, a broker-dealer
is any personrequired to register with the Commission under the
Securities Exchange Actof 1934, except persons who register
pursuant to 15 U.S.C. 78o(b)(11).
9 See 31 CFR 103.122(b)(2), (b)(3), (b)(4) and (b)(5),
respectively.
10 31 CFR 103.122(b)(6).
11 Investment advisers also may open accounts in their own name
at abroker-dealer to facilitate trading on behalf of their clients
until transactionscan be settled to their clients' individual
securities accounts at anotherbroker-dealer or bank. Less commonly,
advisers may open omnibusaccounts for the benefit of their
customers. In these cases, under the CIPRule, the investment
adviser, rather than the beneficial owners, would bethe
broker-dealer's customer.
12 68 FR 23646 (May 5, 2003).
Incoming Letter:
The Incoming Letter is in Acrobat format.
http://www.sec.gov/divisions/marketreg/mr-noaction/sia021204.htm
Home | Previous Page Modified: 02/09/2005
Securities Industry Association: No-Action Letter dated February
12, 2004
https://www.sec.gov/divisions/marketreg/mr-noaction/sia021204.htm
3 of 3 10/25/16, 12:22 PM
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
D I VIS ION OF
TRAD I NG AND MARKETS
January 9, 2015
Mr. Ira D. Hammerman Executive Vice President and General
Counsel Securities Industry and Financial Markets Association 1101
New York Avenue, NW, 81h Floor Washington, DC 20005
Re: Request for No-Action Relief Under Broker-Dealer Customer
Identification Program Rule (31 C.F.R. 1023.220)
Dear Mr. Hammerman:
In your letter dated January 5, 2015, you request assurances
that the staff of the Division of Trading and Markets will not
recommend enforcement action to the Securities and Exchange
Commission under Rule 17a-8 under the Securities Exchange Act of
1934 ("Exchange Act") if a broker-dealer relies on a registered
investment adviser to perform some or all of its customer
identification program ("CIP") obligations, subject to certain
enumerated conditions set forth in your incoming letter.
Specifically, you request that the Division extend a no-action
position that it took in 2013, which is substantially similar to
previous no-action positions first taken by the Division in 2004.
1
See Letter from Annette L. Nazareth, Director, Division of
Market Regulation, Securities and Exchange Commission, to Alan
Sorcher, Securities Industry Association, dated February 12, 2004
(the "2004 Letter"); Letter from Annette L. Nazareth, Director,
Division of Market Regulation, Securities and Exchange Commission,
to Alan Sorcher, Securities Industry Association, dated February
10, 2005; Letter from Robert L.D. Colby, Acting Director, Division
of Market Regulation, Securities and Exchange Commission, to Alan
Sorcher, Securi ties Industry Association, dated July 11, 2006;
Letter from Erik Sirri, Director, Division of Trading and Markets,
Securities and Exchange Commission, to Alan Sorcher, Securities
Industry and Financial Markets Association, dated January 12, 2008
; Letter from Daniel M. Gallagher, Jr., Deputy Director, Division
of Trading and Markets, Securities and Exchange Commission, to Ryan
Foster, Securities Industry and Financial Markets Association,
dated January 11 , 2010; Letter from Lourdes Gonzalez, Acting
Co-Chief Counsel , Division of Trading and Markets, Securities and
Exchange Commission, to Ryan Foster, Securities Industry and
Financial Markets Association, dated January 11, 2011; Letter from
Emily Westerberg Russell, Senior Special Counsel, Division of
Trading and Markets, Securities and Exchange Commission, to Ira
Hammerman, Senior Managing Director and General Counsel, Securities
Industry and Financial Markets Association, dated January 11 ,2013
(the "2013 Letter").
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Mr. Ira Hammerman Page 2 of 4 January 9, 2015
On February 12, 2004, the Division, in consultation with the
Department of Treasury's Financial Crimes Enforcement Network
("FinCEN"), issued a letter stating that it would not recommend
enforcement action to the Commission if a broker-dealer treated a
registered investment adviser as if it were subject to an
anti-money laundering program rule under 3 1 U.S.C. 5318(h) ("AML
Program Rule") for the purposes of paragraph (b)(6) (now (a)(6)) of
the CIP rule applicable to broker-dealers, 31 C.F.R. 103.122 (now
31 C.F.R. 1023.220) ("CIP Rule"). By its terms, the 2004 Letter was
to be withdrawn without further notice on the earlier of: (1) the
date upon which an AML Program Rule for investment advisers becomes
effective, or (2) February 12, 2005. Because an AML Program Rule
for investment advisers did not become effective, and in response
to your subsequent requests for no-action relief, the no-action
position in the 2004 Letter was extended for an additional18 months
on February 10, 2005, for an additional18 months on July 11, 2006,
for an additional two years on January 10, 2008, for an
additional12 months on January 11, 2010, for an additional two
years- subject to certain additional conditions- on January 11,
2011, and for an additional two years on January 11, 2013.
In your letter, you indicate that broker-dealers have come to
rely on the no-action position that was taken in the Division's
previous letters, and ask that the Division extend the position
taken in the 2013 Letter.
Response
Without necessarily agreeing with your assertions, the Division,
following further consultation with FinCEN staff, extends the
no-action position in the 2013 Letter until the earlier of: (1) the
date upon which an AML Program Rule for investment advisers becomes
effective,2 or (2) two years from the date of this letter.
Accordingly, the Division will not recommend enforcement action
to the Commission under Exchange Act Rule 17a-8 if a broker-dealer
treats an investment adviser as if it were subject to an AML
Program Rule for the purposes of paragraph (a)(6) of the CIP Rule
provided that the other provisions of the CIP Rule are met, and: (
1) the broker-dealer's reliance on the investment adviser is
reasonable under the circumstances, as discussed in more detail
below; (2) the investment adviser is a U.S. investment adviser
registered with the Commission under the Investment Advisers Act of
1940; and (3) the investment adviser enters into a contract with
the broker-dealer in which the investment adviser agrees that: (a)
it has implemented its own anti-money laundering program consistent
with the requirements of 31 U.S.C. 5318(h) and will update such
anti-money
See Introduction to the Unified Agenda of Federal Regulatory and
Deregulatory Actions, 79 FR 76455, 76609 (Dec. 22, 2014).
2
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Mr. Ira Hammerman Page 3 of 4 January 9, 2015
laundering program as necessary to implement changes in
applicable laws and guidance, (b) it (or its agent) will perform
the specified requirements of the broker-dealer's CIP in a manner
consistent with Section 326 of the PATRIOT Act, (c) it will
promptly disclose to the broker-dealer potentially suspicious or
unusual activity detected as part of the CIP being performed on the
broker-dealer's behalf in order to enable the broker-dealer to file
a Suspicious Ac tivity Report, as appropriate based on the
broker-dealer's judgment,3 (d) it will certify annually to the
broker-dealer that the representations in the reliance agreement
remain accurate and that it is in compliance with such
representations, and (e) it will promptly provide its books and
records relating to its performance of the CIP to the Commission,
to a self-regulatory organization that has jurisdiction over the
broker-dealer, or to authorized law enforcement agencies, either
directly or through the broker-dealer, at the request of (i) the
broker-dealer, (ii) the Commission, (iii) a self-regulatory
organization that has jurisdiction over the broker-dealer, or (iv)
an authorized law enforcement agency.
As to the reasonableness of a broker-dealer's reliance on an
investment adviser, we understand that broker-dealers seeking to
rely on the no-action position taken in this letter will undertake
appropriate due diligence on the investment adviser that is
commensurate with the broker-dealer's assessment of the money
laundering risk presented by the investment adviser and the
investment adviser's customer base. Such due diligence would be
undertaken at the outset of the broker-dealer's relationship with
the investment adviser, and updated during the course of the
relationship, as appropriate.
Further, we expect that a broker-dealer's assessment of the
money laundering risk presented by an investment adviser and the
investment adviser's customer base would depend on the particular
facts and circumstances. For example, in some instances, a
broker-dealer may consider an affiliated investment adviser to
present a lower money laundering risk than an unaffiliated
investment adviser. The investment adviser's status as an
affiliate, however, is one of many factors that may be relevant to
such a risk
Firms are reminded that nothing in this no-action letter
relieves a broker-dealer of its obligation to establish policies,
procedures, and controls that are reasonably designed to detect and
report suspicious activity that is attempted or conducted by, at,
or through the broker-dealer. See 31 C.P.R. 1023.320(a)(2).
A broker-dealer that chooses not to avail itself of the relief
being granted pursuant to this letter may still contractually del
egate the implementation and operation of its CIP to an investment
adviser; however, the broker-dealer will remain solely responsible
for assuring compliance with the CIP Rule and therefore, must
actively monitor the operation of its CIP and assess its
effectiveness. See "Customer Identification Programs for
Broker-Dealers," Exchange Act Release No. 47752 (Apr. 29, 2003), 68
FR 25113,25123 n. 132 (May 9, 2003).
4
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Mr. Ira Hammerman Page 4 of 4 January 9, 2015
assessment, and an affiliated investment adviser may or may not
present a lower money laundering risk, depending on the facts and
circumstances. 5
This is a staff position with respect to enforcement action only
and does not purport to express any legal conclusions. It may be
withdrawn or modified if the staff determines that such action is
necessary to be consistent with the Bank Secrecy Act and in the
public interest.
Sincerely,
L~~~ Lourdes Gonzalez Assistant Chief Counsel Division of
Trading and Markets
See, ~. United States Senate, Permanent Subcommittee on
Investigations, Committee on Homeland Security and Governmental
Affairs, "U.S. Vulnerabilities to Money Laundering, Drugs, and
Terrorist Financing: HSBC Case History" (July 17, 2012), available
at:
http://www.hsgac.senate.gov/subcommittees/investigations/reports.
5
http://www.hsgac.senate.gov/subcommittees/investigations/reports
-
January 5, 2015
Via Electronic Mail
Lourdes Gonzalez
Assistant Chief Counsel
Division of Trading and Markets
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Re: Request for No-Action Relief under Broker-Dealer Customer
Identification Rule (31 C.F.R. 1023.220)
Dear Ms. Gonzalez:
On behalf of its member broker-dealers, the Securities Industry
and Financial Markets Association
(SIFMA)1 hereby requests that the staff of the Division of
Trading and Markets (the Division) of
the U.S. Securities and Exchange Commission (the SEC or the
Commission) extend the no-action
relief currently in effect with respect to the reliance
provisions of the customer identification rule
applicable to broker-dealers (31 C.F.R. 1023.220) (the CIP
Rule). 2
Under a letter dated January
11, 2013 (the 2013 No-Action Letter), the current relief expires
January 11, 2015.3
As you know, the CIP Rule, which was adopted pursuant to Section
326 of the USA PATRIOT Act,4
requires each broker-dealer to adopt a written customer
identification program (CIP) that includes
risk-based procedures for verifying the identity of each
customer. The CIP Rule permits broker-
dealers to rely on certain financial institutions to perform CIP
procedures with respect to shared
customers. Such reliance is permissible under the CIP
regulations where: (1) it is reasonable under the
circumstances; (2) the relied-on financial institution is
subject to an anti-money laundering program
rule (AMLP Rule) under 31 U.S.C. 5318(h) of the Bank Secrecy Act
(BSA)5
and is regulated by
1 SIFMA brings together the shared interests of hundreds of
securities firms, banks and asset managers. SIFMAs mission
is to support a strong financial industry, investor opportunity,
capital formation, job creation and economic growth, while
building trust and confidence in the financial markets. SIFMA,
with offices in New York and Washington, D.C., is the
U.S. regional member of the Global Financial Markets
Association. For more information, visit www.sifma.org.
2 See Letter from Emily Westerberg Russell, Senior Special
Counsel, Division of Trading and Markets, SEC, to Ira
Hammerman, Senior Managing Director and General Counsel, SIFMA,
dated January 11, 2013, available at
http://www.sec.gov/divisions/marketreg/mr-noaction/2013/sifma011113-17a-8.pdf.
3 See id.
4 Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of
2001 (the USA PATRIOT Act), Pub. L. No. 107-56 (2001).
5 31 U.S.C. 5311 et seq.
http://www.sifma.org/http://www.sec.gov/divisions/marketreg/mr-noaction/2013/sifma011113-17a-8.pdf
-
Lourdes Gonzalez
January 5, 2015
Page 2 of 4
a federal functional regulator; and (3) the relied-on financial
institution enters into a contract requiring
it to certify annually to the broker-dealer that it has
implemented its anti-money laundering (AML)
program and that it (or its agent) will perform specified
requirements of the broker-dealers CIP.6
The
reliance provision is designed to permit financial institutions
with shared customers to agree as to how
they will allocate performance of the CIP requirements and,
thereby, rely on one another to avoid
unnecessary duplication of efforts with respect to a given
customer.
At the time that the CIP Rule became effective, SEC-registered
investment advisers (RIAs) were the
subject of a proposed AMLP Rule that had not been
finalized.7
As a result, broker-dealers were not
permitted under the CIP Rule to rely on RIAs to perform any part
of their CIP requirements. For that
reason, SIFMA specifically sought no-action relief addressing a
broker-dealers reliance on an RIA
under 31 C.F.R. 1023.220(a)(6) (then 31 C.F.R. 103.122(b)(6)) to
perform some or all of the
broker-dealers CIP obligations with respect to shared customers.
As discussed below, that relief was
granted and has since been extended a number of times, and SIFMA
now seeks a further extension of
the Division staffs no-action position.
No-Action Relief to Date
The requested relief was first issued by the staff of the
Division (then known as the Division of Market
Regulation), in consultation with the Department of the
Treasurys Financial Crimes Enforcement
Network (FinCEN), in 2004. 8
Since that time, the no-action relief has been extended a number
of
times,9
including three extensions granted after the withdrawal of
FinCENs proposal to subject certain
investment advisers to an AMLP Rule.10
In each of the no-action letters since 2004, Division staff has
stated that it will not recommend to the
Commission that enforcement action be taken under Rule 17a-8
under the Securities Exchange Act of
1934, as amended,11
based on a broker-dealers reliance on an RIA to perform certain
CIP obligations,
subject to certain conditions. Most recently, under the 2013
No-Action Letter, Division staff stated
that it would not recommend enforcement action if a
broker-dealer treats an investment adviser as if it
were subject to an AMLP Rule for the purposes of paragraph
(a)(6) of the CIP Rule, provided that the
6 31 C.F.R. 1023.220(a)(6).
7 See Anti-Money Laundering Programs for Investment Advisers, 68
Fed. Reg. 23646 (May 5, 2003).
8 See Letter from Annette L. Nazareth, Director, Division of
Market Regulation, SEC, to Alan Sorcher, Vice President and
Associate General Counsel, Securities Industry Association
(SIA), dated February 12, 2004.
9 See Letter from Annette L. Nazareth, Director, Division of
Market Regulation, SEC, to Alan Sorcher, Vice President and
Associate General Counsel, SIA, dated February 10, 2005; Letter
from Robert L.D. Colby, Acting Director, Division of
Market Regulation, SEC, to Alan Sorcher, Vice President and
Associate General Counsel, SIA, dated July 11, 2006; Letter
from Erik Sirri, Director, Division of Trading and Markets, SEC,
to Alan Sorcher, Vice President and Associate General
Counsel, SIFMA, dated January 10, 2008; Letter from Daniel M.
Gallagher, Jr., Deputy Director, Division of Trading and
Markets, SEC, to Ryan Foster, Manager, SIFMA, dated January 11,
2010 (the 2010 No -Action Letter); Letter from
Lourdes Gonzalez, Acting Co-Chief Counsel, Division of Trading
and Markets, SEC, to Ryan D. Foster, Manager, SIFMA,
dated January 11, 2011 (the 2011 No-Action Letter); and the 2013
No-Action Letter.
10 See Withdrawal of the Notice of Proposed Rulemaking;
Anti-Money Laundering Programs for Investment Advisers, 73
Fed. Reg. 65568 (November 4, 2008), and the 2010 No-Action
Letter, the 2011 No-Action Letter and the 2013 No-Action
Letter, supra.
11 17 C.F.R. 240.17a-8.
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Lourdes Gonzalez
January 5, 2015
Page 3 of 4
other provisions of the CIP Rule are met, and: (1) the
broker-dealers reliance on the investment
adviser is reasonable under the circumstances;12
(2) the investment adviser is a U.S. investment adviser
registered with the Commission under the Investment Advisers Act
of 1940, as amended; and (3) the
investment adviser enters into a contract with the broker-dealer
in which the investment adviser agrees
that (a) it has implemented its own AML program consistent with
the requirements of 31 U.S.C.
5318(h) and will update such AML program as necessary to
implement changes in applicable laws and
guidance, (b) it (or its agent) will perform the specified
requirements of the broker-dealers CIP in a
manner consistent with Section 326 of the PATRIOT Act, (c) it
will promptly disclose to the broker-
dealer potentially suspicious or unusual activity detected as
part of the CIP being performed on the
broker-dealers behalf in order to enable the broker-dealer to
file a Suspicious Activity Report, as
appropriate based on the broker-dealers judgment, (d) it will
certify annually to the broker-dealer that
the representations in the reliance agreement remain accurate
and that it is in compliance with such
representations, and (e) it will promptly provide its books and
records relating to its performance of
CIP to the Commission, to a self-regulatory organization that
has jurisdiction over the broker-dealer, or
to authorized law enforcement agencies, either directly or
through the broker-dealer, at the request of
(i) the broker-dealer, (ii) the Commission, (iii) a
self-regulatory organization that has jurisdiction over
the broker-dealer, or (iv) an authorized law enforcement agency.
As indicated above, this no-action
position is in effect until January 11, 2015.
Reliance on Registered Investment Advisers
As indicated in our prior requests for no-action relief, some of
SIFMAs broker-dealer members have
come to rely on RIAs under the CIP Rule and the staffs no-action
relief to perform some or all of the
CIP obligations related to customers with which both have a
customer relationship. SIFMA believes
strongly that the reliance provisions of the CIP Rule play an
important and necessary role in effective
anti-money laundering compliance because intermediary and shared
business relationships are a
common and legitimate part of the securities industry and U.S.
capital markets. RIAs are regulated by
a federal functional regulator, and many have established AML
programs consistent with 31 U.S.C.
5318(h). Permitting two regulated financial institutions with a
common customer to rely on one
another to perform some or all of the CIP requirements under the
CIP Rule avoids duplication of
efforts and inefficient allocation of significant and costly
resources.
SIFMA also believes that the interaction between broker-dealers
and RIAs is precisely the type of
relationship intended to be covered by the reliance provisions,
and that the staffs no-action relief
should continue to be available to firms in a position to
implement such reliance. RIAs often have the
most direct relationship with the customers they introduce to
broker-dealers, are best able to obtain the
necessary documentation and information from and about the
customers, and therefore are in the best
position to perform some or all of the requirements of the CIP
Rule. Moreover, RIAs are often
12 As to the reasonableness of a broker-dealers reliance on an
investment adviser, Division staff stated in the 2013 No-
Action Letter its understanding that broker-dealers seeking to
rely on the no-action position in the letter will undertake
appropriate due diligence on the investment adviser that is
commensurate with the broker -dealers assessment of the money
laundering risk presented by the investment adviser and the
investment adviser s customer base. Such due diligence would
be undertaken at the outset of the broker-dealers relationship
with the investment adviser, and updated during the course of
the relationship, as appropriate. The staff stated further that
a broker-dealers assessment of the money laundering risk
presented by an investment adviser and the investment advisers
customer base would depend on the particular facts and
circumstances, and that an investment advisers status as an
affiliate is one of many factors that may be relevant to such a
risk assessment. See 2013 No-Action Letter, at p. 3.
-
Lourdes Gonzalez
January 5, 2015
Page 4 of 4
reluctant to have the broker-dealer contact the customer because
they view the broker-dealer as their
competitor. Accordingly, SIFMAs broker-dealer members would like
to continue to have the staffs
no-action position available for reliance on RIAs under the CIP
Rule to perform some or all of broker-
dealers CIP obligations with respect to shared customers.
Request for No-Action Relief
For the foregoing reasons, SIFMA respectfully requests that the
Division staff extend the no-action
position stated in the 2013 No-Action Letter, subject to the
conditions stated in that letter. We note
that FinCEN has publicly stated that it has drafted a notice of
proposed rulemaking that would
prescribe minimum standards for AML programs to be established
by certain investment advisers and
would require such investment advisers to report suspicious
activity to FinCEN.13
* * *
We thank you for the opportunity to submit this no-action
request and would be happy to discuss our
request. Please do not hesitate to contact me if you would like
to discuss these matters further.
Respectfully submitted,
Ira D. Hammerman
Executive Vice President and General Counsel
cc: Jennifer Shasky Calvery, Director, FinCEN Jamal El-Hindi,
Associate Director, FinCEN John Fahey, Branch Chief, SEC Emily
Westerberg Russell, Senior Special Counsel, SEC Lindsay Kidwell,
Special Counsel, SEC
13 See Introduction to the Unified Agenda of Federal Regulatory
and Deregulatory Actions, 79 Fed. Reg. 76455, 76609
(December 22, 2014). FinCEN has stated further that it has been
working closely with the Commission on issues related to
the draft proposal. See id.
http:FinCEN.13
-
MemberFINRA/SIPC,MARegisteredwiththeSECandMSRB
421PenbrookeDrive,Suite12BPenfield,NewYork14526(585)3643065www.tesseracapital.com
IdentityVerificationFormEntities
FullLegalName:
____________________________________________________________________
Exemptions
ProspectiveAdvisoryClientswhoareincludedinanyofthefollowingcategoriesareexemptfromtheClientidentificationprocedures:
CheckAllthatApply
AccountsopenedforretirementplansestablishedundertheEmployeeRetirementIncome
SecurityActof1974(ERISA); An Entity that has an existing account
with Tessera; provided Tessera has a reasonable
beliefthatitknowsthetrueidentityofthePerson; An Entity that is a
department or agency of theU.S., of any State of theU.S. or of
any
politicalsubdivisionofanyState;
AnentityestablishedunderthelawsoftheU.S.,ofanyStateorofanypoliticalsubdivision
ofanyStateorunderan interstatecompactbetweentwoormoreStates,
thatexercisesgovernmentalauthorityonbehalfoftheU.S.oranysuchStateorpoliticalsubdivision;
AnentitythatisafinancialinstitutionregulatedbyaFederalFunctionalRegulator;or
anyentity,otherthanaBank,whosecommonstockoranalogousequityinterestsarelisted
ontheNewYorkStockExchangeortheAmericanStockExchangeorwhosecommonstockoranalogousequityinterestshavebeendesignatedasaNasdaqNationalMarketSecuritylisted
onNasdaq StockMarket (except stock or interests listed underNasdaq
SmallCapIssuesheading).Anentitythatisafinancialinstitution,otherthanaBank,isexemptonlytotheextentofitsU.S.operations.
Ifanentitydoesnotfitanyoftheabovecategorieslistedabovethenpleasecontinuetocompletetheremainderoftheforminitsentirety.
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421PenbrookeDrive,Suite12BPenfield,NewYork14526(585)3643065www.tesseracapital.com
OtherNamesEntityDoesBusinessAs:
______________________________MainAddress: OtherLocations:
TaxPayerIdentificationNumber: EntityFormedIn:
______________________________TypeofBusiness:
______________________________SourcesofIncome:
______________________________SourcesofFundsforthisAccount:
______________________________
IstheentityaforeigninstitutionlocatedoutsidetheUS?Yes No
IstheentitylocatedinCanada,theUKorSwitzerland?Yes No
(IftheanswertothelastquestionisNothenHeightenedVerificationisrequiredonthisentity)
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421PenbrookeDrive,Suite12BPenfield,NewYork14526(585)3643065www.tesseracapital.com
IdentificationVerification
The following is a list of acceptable identification sources.
Please select those items
thatwerecollectedandverifiedforthespecificentity.
documentsverifyingtheexistenceof
theEntity,suchascopiesofarticlesof incorporation,trust documents,
operating agreements, partnership agreements or government
issuedlicenses,certifiedbyaregulatoryauthoritywithwhichthe license
isheldorthedocumenthasbeenfiled;
resolutionsorotherdocumentationcertifiedbyaseniorofficer,managerorothermember
of senior management verifying the ability of the entity to open
a securities account
orotherwisecontractfortheservicesbeingrequested;
certificates or other representations of directors,managing
partners or othermembers of
seniormanagementof theentitydocumenting the authorityof the
individualopening
theaccountorcontractingforserviceswithTessera,todoso;
goodstandingcertificatesfromappropriatejurisdictions;and
copiesorconfirmationsofanymaterialgovernmentissuedlicenses.ForUSBasedentitiesatleastoneoftheabovesourcesisrequiredtobecheckedandverified.Ifanentityislocated
in Canada, UK or Switzerland, the entity shall be treated, for
verification purposes, as if it
werelocatedintheUS.FornonUSentitieslocatedoutsideofCanada,UKorSwitzerland,heightenedverificationisrequiredandatleast3oftheseverificationsourcesmustbecheckedandverified.Notes:
SupervisoryApproval:
Signature:
______________________________LisaRothAMLCO,TesseraCapitalPartners
Date:
-
InvestorName:
EntityType:
Investment:
Note:Includemanagernameandvehicleinvestedin
Istheprospectiveclientalegalentityingoodstanding? Yes
NoNote:AttachcopyofinformationfromSecofStateWebsite
Doestheprospectiveclient'sinvestmentpolicyallowforinvestmentinthisstrategyorsecurity?
Yes NoNote:Attachcopyofipsifavailable
WebsiteSearch
Haveanymattersbeenuncoveredthatcouldaffecttheinvestment? Yes No
GoogleSearch
Haveanymattersbeenuncoveredthatcouldaffecttheinvestment? Yes
NoNote:Ifyes,thenaddappropriatedocumentation
CriminalSearch
Haveanymattersbeenuncoveredthatcouldaffecttheinvestment? Yes No
CivilSearch
Haveanymattersbeenuncoveredthatcouldaffecttheinvestment? Yes No
RegulatorySearch
Haveanymattersbeenuncoveredthatcouldaffecttheinvestment? Yes
NoNote:CheckSEC,FINRA,CFTC,SecofState,etc.
IstheinvestoranAccreditedInvestor? Yes No
Doesthisofferingrequireinvestortobeaccredited? Yes No
Hasasuitabilityassessmentbeencompleted? Yes
NoNote:Attachacopyofthesuitabilityassessmenttothisdocument
Whoissigningtheinvestmentmanagementagreement?
Isthispersonauthorizedtoactonbehalfoftheclient? Yes No
Howdoyouknow?
Preparer:
NameandTitle
Name,TitleandDate
InvestorDueDiligenceChecklist
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MemberFINRA/SIPC,MARegisteredwiththeSECandMSRB
421PenbrookeDrive,Suite12BPenfield,NewYork14526(585)3643065www.tesseracapital.com
ClientScreeningForm
Name:
___________________________________________________________________________
AccountBeneficiary: ______________________________
Completeonlyifdifferentthanthepersonopeningaccount
Theclienthasbeenscreenedagainstthefollowinglistsandisnotamatch:
OFACList
FirmDesignatedProhibitedPersonList
PersonsProhibitedbyFutureLaworRegulationList
FINCENAdvisory
ThisclientisconsideredtobeaHighRiskClientforthefollowingreasons:
SeniorForeignPoliticalFigure
LocatedoutsidetheUS(exceptionsare:Canada,theUKandSwitzerland)
ForeignBank
FINCENAdvisory
OtherHighRiskPerson
________________________________(describereason)
SupervisoryApproval:
Signature:
______________________________LisaRothAMLComplianceOfficer,TesseraCapitalPartners
Date:
-
DueDiligenceReport
-
Page 2
I. Summary
FundName:
Address:
KeyContactInformation
TargetFundSize
CapitalRaisedtodate:
ClosingDate:
II. GeneralPartnerInformation Fulllegalnameoffund:
Fundtype:
GP:
PrimarycontactinformationforGeneralPartner:
ThePartnership
TheOffering
PurposeofthePartnership:
ObjectivesofthePartnership:
Sponsor:
Detailsofownershipstructure
Legalstructureoffund:
-
Page 3
DomicileofFund:
Offshorevehicles:
DomicileofOffshoreFund: InvestmentManager:
Describeorganization,including:partners,principals,andassociates
DoesFirm/Managerhaverealestatefocusedresearchprofessionals?
HistoryoftheFirm
IstheInvestmentManagerregistered?
Doesthefirmoranypersonnelhaveanydisclosureitems,hadtheirlicensessuspended,
cancelledorrevoked,beenbarredfromtheindustry,hadanydisciplineactionsagainstthem?
TotalAUMmanaged PreviousFundInformation
Arethereanyotherissuesthatcouldaffectthemanagementofthefund?
III. LegalIssuesAffectingGPs
Arethereanyoutstandinglegaljudgmentsagainstthepartnersorprofessionals?
Arethereanyconflictsofinterest?
WhatcontrolsareinplacetoprotecttheinterestsoftheFundsInvestors?
IV. TheStrategy
LocationofthePropertiesandsurroundingareasBlindPool
Objective:
V. PartnershiplevelInformation TheOffering:
-
Page 4
EligibleInvestors:
TargetCapitalRaise:
Amountraisedtodate: UseofProceeds
WillGPinvestaslimitedpartner;
Ifsowhoandhowmuch?
WillPrincipals,employeesorotheraffiliatedindividualsbeallowedtomakepersonalinvestmentsinthefund?
SharesandMinimumcommitment
CompensationoftheGP
ManagementfeesfortheGP?
Isleverageused?
PerformanceandPreferredReturn
Subscriptions(timingandnotice)
RedemptionsandTerms(timing,noticeandlockup)
Distributions:
TransfersofShares
WhatistheholdingperiodforthisFund:
ShareholderMeetings:
Willnewmoneybeacceptedaftercapacityofthefundisreached?
VI. Organization/ManagementTeam DescribetheOrganization
Howlonghavekeyprincipalsworkedtogether?
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Page 5
BiosofOfficers
Havetherebeenanyturnoveramongseniorinvestmentprofessionalsoverthepastthreeyears?
EmploymentContractsinPlace?Ifnothowdotheyretainpeople?
BoardofDirectors?Isthereone?
PreviousExperienceApplicabletoCurrentFund
OtherActivitiesoftheGPanditsAffiliates
Locationsofoffices?
Doesthefirmcarryanyinsurance?
VII. InvestmentEnvironmentandCompetition
Howdoyoumonitorthecurrentmarketenvironment?
CurrentMarket
CompetitiveAdvantages
Competitors
VIII. InvestmentManagementandDecisionMakingProcess
DescribetheinvestmentdecisionmakingprocessandeveryonesroleInclude:InvestmentCommitteeandanyothercommitteesthatmightbeapartoftheprocess
Howareinvestmentopportunitiesstaffed?
Howareprojectsidentifiedandselected?
Howarepropertiesevaluated?
IX. StrategyandApproach
SummaryofInvestmentStrategy
Investmentphilosophy
DescribehowthePartnershipmonitorsitsinvestment.
-
Page 6
X. EvaluationofRisk
Describethepotentialriskfactorsrelatedtooverallmarketconditions.
OtherRiskFactors
ConflictsofInterest:
FinancialForecasts:
Describeyouroperationalriskmanagementprocessincluding:AccountingandReporting,BankAccountsandControls,InformationSystems
LegalDueDiligenceProcess
XI. Performance
Whatisthefundstargetedperformance?
Howwilltheperformancebeachieved?
DiscussthekeyfactorsthatmayimpactthefinancialperformanceofthePartnership.
Arereturnsdesignedtobeabsoluteorrelativetoanindex?
Dotheprincipalshaveconsistentlongtermtrackrecord?
Howdotargetedreturnscomparetoactualreturns?
XII. Compliance
Whohandlesthefirmscompliance?
Anymaterialcriminal,civiloradministrativeproceedingsagainstthefirmoritspersonnel?
XIII. OperationsandBackoffice
Accounting
Howdoyouinforminvestorsastominorandmajorchangesmaketoyourprocess?
Whatreportsandinformationdoyouprovide?
Whataretheoperationaloraffiliaterelationships?
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Page 7
Firmpoliciesandprocedures?
AntiMoneyLaunderingProcedures
BCPandDRP
Cybersecurity
ServiceProviders
XIV. Documentsrequiredforduediligence:
OfferingMemorandum PartnershipAgreement SubscriptionDocument
AuditReports LLCDocuments OperatingAgreement CopyofRegDFiling
BadActorsCertification
SECExamReportsIncludingFindingsanddeficiencylettersifavailable.
ADVPartsI&II(2A&2B)+FormPF
AnySubpoenasorRegulatoryActionNotices AMLpolicywithdetailsonCIP
BCP/DRPPlans PolicyandProceduresmanual AnyandallMarketingmaterials
Monthlyperformanceinexcelspreadsheet
AccesstoWebsiteifpasswordprotected
AnyRegulatoryfilingsifappropriate
DetailsonOwnershipstructureifnotinPPM
BiosordescriptionofanyownersnotinPPM
Anypastorcurrentlitigation,arbitrationsorlegalproceedingsagainstfirm
ListofserviceprovidersifnotincludedinPPM
Writtendescriptionofinvestmentprocessasdetailedaspossible
-
Page 8
Listofallsocialmediausedbyfirm
Anyotherinformationyouwanttotellus.
XV. OtherInformation Reviewofsubscriptiondocuments
ReviewofLPAgreement
Reviewofanyotherkeydocs
Sitevisits
Staff/PrincipalMeetingsandconferencecalls.
-
Member NASD / SIPC
New Product Approval Evaluation Form
Product Name: Brief Product Description:
If you require additional space attach additional pages to this
document.
Is the product similar to any product currently offered by the
firm? Yes No Would you consider this product to be More or Less
complex than other products currently offered by the firm? What
types of investors would be interested in this product? Retail
Institutional Was the product designed for a specific geographic
region? Yes No If Yes, please specify: How many competitors are
there in relation to this product offering? Is the product
competitive with other similar products available in the industry?
Yes No Is the experience required to sell this product similar to
the experience required to sell any of the firms existing products
Yes No Will employee training be required? Yes No Are there any
conflicts of interest related to the sale of this product with the
firms existing business lines? Yes No What is the proposed fee for
this product? Are there are specific resources required to sell
this product? Yes No
If Yes, please specify:
708 Third Avenue, 6th Floor New York, NY 10017 (212) 209 3822
www.tesseracapital.com
-
Member NASD / SIPC
Please submit any comments, materials or other relevant
information you have pertaining to this product. Tesseras goal is
to ensure that a fair and thorough review may be undertaken in
order to protect the firm and its employees.
Submitted by: Reviewed by: Name: Name: Signature: Title: Date:
Date: Status: Accepted Rejected More information requested Date:
Notes: Status: Accepted Rejected More information requested Date:
Notes:
708 Third Avenue, 6th Floor New York, NY 10017 (212) 209 3822
www.tesseracapital.com
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New Product Onboarding Alternative and Direct Investments
o Make an initial determination as to whether or not a
particular product is worthy of further consideration and whether
it warrants a place on the firms platform, if approved, i.e., that
it may be suitable for someone. A particular focus during this
initial step will involve an evaluation of risks, potential rewards
and conflicts of interest.
o Initial evaluation of deal drivers is crucial; for example,
how might rising interest rates or dramatic changes in the price of
oil and gas affect a particular investments prospects and outcome.
Does the particular investment under consideration have a
reasonable chance of meeting its objectives and/or reaching a
successful outcome? Are any inherent conflicts of interest
adequately addressed and resolvable?
o Review prospectus/offering memorandum, paying particular
attention to use of proceeds, fees, deal terms and sharing
arrangements, profit participation, etc., for fairness; where
financial forecasts are included, assess reasonableness of
attendant assumptions
o Selectively obtain third party DD reports; third party DD
reports (see current utilization list below) are ancillary
documents used in connection with execution of the firms internal
DD requirements. They are not a substitute for the firms internal
DD requirements but are used to augment the firms responsibilities
in those areas best served by a third party, e.g., principal
background checks, disclosure/disposition of regulatory issues, if
any, review of sponsor and deal-related organizational documents,
verification of escrow/title/leasehold/insurance
coverage/encumbrance documentation, tax issues, prior performance
and adequacy of legally-required disclosures
o Third party DD providers will be subjected to the same level
of initial and ongoing scrutiny as offering sponsors in order to
ascertain their general capabilities, staffing levels and specific
competencies.
o Obtain and review audited financial statements, where
available; ensure the auditors are credible
o Obtain and review other third party independent reports, where
applicable, including such items as real estate appraisals,
property condition reports, geology, engineering and/or leasehold
valuation reports; other independent reports in instances where
valuations are essential, e.g., repriced follow-on offerings;
assess credibility of underlying report providers
o Arrange site visit if vetting a new sponsor and/or meet
face-to-face with principals; because of heightened uncertainty and
attendant risk in onboarding a new sponsor, extra care and
diligence will be taken in order to establish a high level of
comfort with respect to a new sponsors reputation, prior
experience, background, etc., before seriously entertaining new
product offerings
o Where appropriate and/or where deemed necessary, obtain list
of other BDs in the selling group and confer therewith
o Make an assessment as to whether the stated suitability
guidelines are sufficient and determine whether ancillary
acknowledgments are warranted for the purpose of enhancing
compliance considerations
-
o Ensure training availability through AI Insight; if no
training is available, consider severely limiting who can sell the
product based on predetermined factors
o Prepare an internal memorandum detailing the firms DD process,
what was reviewed, what material questions arose, if any, and how
they were disposed of
o Conduct ongoing due diligence for purposes of continuing
in-force selling agreements, through: A periodic review of
sponsor-filed quarterly reports and SEC filings, where
applicable A periodic review of third-party DD provider
quarterly reports and
sponsor updates Participate in third-party DD provider
conference calls Attend industry trade group meetings and DD
forums
o Third party DD providers with whom AIC has current
relationships are listed below. Both sponsor and/or program-level
reports are obtained from one or more providers, as deemed
necessary. Third party reports are considered ancillary to and an
adjunct of the firms principal responsibility for conducting
adequate internal due diligence on any program(s) with which the
firm enters into a selling agreement. Mick Law, P.C., LLO, Omaha,
NE Bowman Law Firm, LLC, McEwen, TN FactRight, LLC, Minneapolis, MN
SK Research LLC, Columbia, MD Buttonwood Investment Services, LLC,
Littleton, CO Miterko & Associates, Roswell, GA
-
New Product Onboarding Mutual Funds (MF)
Insurance-based product (IBP) Third-party asset management
programs (TAMP)
o Meet with wholesaler for initial product introduction (usually
as a result of a field referral from one of our RRs)
o Make an initial determination as to whether or not the product
is worthy of further consideration and whether it warrants a place
on our platform, if approved, i.e., that it may be suitable for
someone
o Review prospectus and/or offering documents and marketing
materials o Selectively obtain general due diligence information,
where available, using such
resources as: Morningstar Insurance company rating information
SEC ADV filings and updates
o In the case of indexed annuities, insure that new products
fall within the companys established product guidelines vis a vis,
surrender charges, insurance company ratings, no two-tier
structure, etc.
o In the case of TAMPs, insure a minimum of three-year history o
Review audited results and GIPS compliant performance data, where
available;
investigate alternative assurances if such information is not
available o Arrange a site visit, face-to-face meeting or
teleconference with principals if
vetting a new sponsors, where appropriate o Obtain list of other
BDs in the selling group and confer therewith, if deemed
necessary o Make an assessment as to whether the stated
suitability guidelines, if any, are
sufficient and determine whether ancillary acknowledgments are
warranted for the purpose of enhancing compliance
considerations
-
MemberFINRA/SIPC,MARegisteredwiththeSECandMSRB
421PenbrookeDrive,Suite12BPenfield,NewYork14526(585)3643065www.tesseracapital.com
FINRARule5123Test
OfferingName:
_____________________________________________________________________
FINRARule5123TestEachmemberthatsellsasecurityinanonpublicofferinginrelianceonanavailableexemptionfromregistrationundertheSecuritiesAct(privateplacement)must:
(i)
submittoFINRA,orhavesubmittedonitsbehalfbyadesignatedmember,acopyofanyprivateplacementmemorandum,termsheetorotherofferingdocument,includinganymaterially
amended versions thereof, used in connection with such sale within
15calendardaysofthedateoffirstsale;or
(ii) indicatetoFINRAthatnosuchofferingdocumentswereused.
ExemptionsThefollowingprivateplacementsareexemptfromtherequirementsofthisRule:
1.
offeringssoldbythememberorpersonassociatedwiththemembersolelytoanyoneormoreofthefollowing:
a. institutionalaccounts,asdefinedinRule4512(c);b.
qualifiedpurchasers,asdefined inSection2(a)(51)(A)of the
InvestmentCompany
Act;c.
qualifiedinstitutionalbuyers,asdefinedinSecuritiesActRule144A;d.
investmentcompanies,asdefinedinSection3oftheInvestmentCompanyAct;e.
an entity composed exclusively of qualified institutional buyers,
as defined in
SecuritiesActRule144A;f.
banks,asdefinedinSection3(a)(2)oftheSecuritiesAct;g.
employeesandaffiliates,asdefinedinRule5121,oftheissuer;h.
knowledgeableemployeesasdefinedinInvestmentCompanyActRule3c5;i.
eligiblecontractparticipants,asdefinedinSection3(a)(65)oftheExchangeAct;andj.
accredited investors described in Securities Act Rule 501(a)(1),
(2), (3) or (7). **
2.
offeringsofexemptedsecurities,asdefinedinSection3(a)(12)oftheExchangeAct;
3.
offeringsmadepursuanttoSecuritiesActRule144AorSECRegulationS;4.
offeringsofexemptsecuritieswithshorttermmaturitiesunderSection3(a)(3)oftheSecurities
-
421PenbrookeDrive,Suite12BPenfield,NewYork14526(585)3643065www.tesseracapital.com
ActanddebtsecuritiessoldbymemberspursuanttoSection4(2)oftheSecuritiesActsolongasthematuritydoesnotexceed397daysandthesecuritiesareissuedinminimumdenominationsof$150,000(ortheequivalentthereofinanothercurrency);
5. offerings of subordinated loans under SEA Rule 15c31,
Appendix D (see NASD Notice to
Members0232(June2002));
6. offeringsofvariablecontracts,asdefinedinRule2320(b)(2);
7. offerings of modified guaranteed annuity contracts and
modified guaranteed life
insurancepolicies,asreferencedinRule5110(b)(8)(E);
8. offerings of nonconvertible debt or preferred securities that
meet the transaction eligibility
criteriaforregisteringprimaryofferingsofnonconvertiblesecuritiesonFormsS3andF3;9.
offeringsofsecurities issued
inconversions,stocksplitsandrestructuringtransactionsthatare
executed by an already existing investor without the need for
additional consideration orinvestmentsonthepartoftheinvestor;
10.
offeringsofsecuritiesofacommoditypooloperatedbyacommoditypooloperator,asdefined
underSection1a(11)oftheCommodityExchangeAct;11.
businesscombinationtransactionsasdefinedinSecuritiesActRule165(f);12.
offeringsofregisteredinvestmentcompanies;13.
standardizedoptions,asdefinedinSecuritiesActRule238;and14.
offerings filed with FINRA under Rules 2310, 5110, 5121 and 5122,
or exempt from filing
thereunderinaccordancewithRule5110(b)(7).
-
421PenbrookeDrive,Suite12BPenfield,NewYork14526(585)3643065www.tesseracapital.com
Whoistheinvestor? Whattypeofentityismakingtheinvestment?
Doestheinvestorfallunderoneoftheexemptionslistedabove?Yes
NoWhichexemption? IfNo,thencompletethefollowing:Dateofsubscription?
DatePPMorOfferingDocumentsFiledwithFINRA
SupervisoryApproval:
Signature:
___________________________DonnaDiMariaChiefComplianceOfficer,TesseraCapitalPartners
Date:
-
421PenbrookeDrive,Suite12BPenfield,NewYork14526(585)3643065www.tesseracapital.com
DefinitionsUsedAccreditedInvestor: ((1)Anybankas defined
insection 3(a)(2) oftheAct, or any savings and loan association or
otherinstitution as defined insection 3(a)(5)(A) of theActwhether
acting in its individual or fiduciarycapacity; anybroker or dealer
registered pursuant tosection 15 oftheSecurities Exchange Act
of1934; anyinsurance companyas defined insection 2(a)(13) oftheAct;
anyinvestmentcompanyregistered under theInvestment Company Act of
1940or abusiness
developmentcompanyasdefinedinsection2(a)(48)ofthatAct;anySmallBusinessInvestmentCompanylicensedby
the U.S.Small Business Administrationundersection 301(c) or (d)
oftheSmall
BusinessInvestmentActof1958;anyplanestablishedandmaintainedbyastate,itspoliticalsubdivisions,orany
agency or instrumentality of astateor its political subdivisions,
for the benefit of itsemployees, if suchplanhas total assets
inexcessof$5,000,000;
anyemployeebenefitplanwithinthemeaningoftheEmployeeRetirement
IncomeSecurityActof1974if the investmentdecision
ismadebyaplanfiduciary,asdefinedinsection3(21)ofsuchact,whichiseitherabank,savingsandloan
association,insurance company, or registered investment adviser, or
if theemployee benefitplanhas total assets in excess of $5,000,000
or, if a selfdirectedplan, with investment
decisionsmadesolelybypersonsthatareaccreditedinvestors;(2)Any
privatebusiness development companyas defined insection 202(a)(22)
oftheInvestmentAdvisersActof1940;(3)Anyorganizationdescribedinsection501(c)(3)oftheInternalRevenueCode,corporation,Massachusettsorsimilarbusinesstrust,orpartnership,notformedforthespecificpurposeofacquiringthesecuritiesoffered,withtotalassetsinexcessof$5,000,000;(7)Anytrust,withtotalassetsinexcessof$5,000,000,notformedforthespecificpurposeofacquiringthesecuritiesoffered,whosepurchaseisdirectedbyasophisticatedpersonasdescribedin230.506(b)(2)(ii);and
**PleasenotethatthedefinitionofanaccreditedinvestorforthePurposeofRule5123doesnotincludetheexemptionsforeverytypeofaccreditedinvestors.
InstitutionalAccount
(1)
abank,savingsandloanassociation,insurancecompanyorregisteredinvestmentcompany;
(2)
aninvestmentadviserregisteredeitherwiththeSECunderSection203oftheInvestmentAdvisersActorwithastatesecuritiescommission(oranyagencyorofficeperforminglikefunctions);or
(3)
anyotherperson(whetheranaturalperson,corporation,partnership,trustorotherwise)withtotalassetsofatleast$50million.
-
421PenbrookeDrive,Suite12BPenfield,NewYork14526(585)3643065www.tesseracapital.com
QualifiedInstitutionalBuyer:
(1)
Anyofthefollowingentities,actingforitsownaccountortheaccountsofotherqualifiedinstitutionalbuyers,thatintheaggregateownsandinvestsonadiscretionarybasisatleast$100millioninsecuritiesofissuersthatarenotaffiliatedwiththeentity:
a. Anyinsurancecompanyasdefinedinsection2(a)(13)oftheAct;
b.
AnyinvestmentcompanyregisteredundertheInvestmentCompanyActoranybusinessdevelopmentcompanyasdefinedinsection2(a)(48)ofthatAct;
c.
AnySmallBusinessInvestmentCompanylicensedbytheU.S.SmallBusiness
Administrationundersection301(c)or(d)oftheSmallBusinessInvestmentActof1958;d.
Anyplanestablishedandmaintainedbyastate,itspoliticalsubdivisions,oranyagency
orinstrumentalityofastateoritspoliticalsubdivisions,forthebenefitofitsemployees;e.
AnyemployeebenefitplanwithinthemeaningoftitleIoftheEmployeeRetirement
IncomeSecurityActof1974;f.
Anytrustfundwhosetrusteeisabankortrustcompanyandwhoseparticipantsare
exclusivelyplansofthetypesidentifiedinparagraph(a)(1)(i)(D)or(E)ofthissection,excepttrustfundsthatincludeasparticipantsindividualretirementaccountsorH.R.10plans.
g.
Anybusinessdevelopmentcompanyasdefinedinsection202(a)(22)oftheInvestment
AdvisersActof1940;h.
Anyorganizationdescribedinsection501(c)(3)oftheInternalRevenueCode,
corporation(otherthanabankasdefinedinsection3(a)(2)oftheActorasavingsandloanassociationorotherinstitutionreferencedinsection3(a)(5)(A)oftheActoraforeignbankorsavingsandloanassociationorequivalentinstitution),partnership,orMassachusettsorsimilarbusinesstrust;and
(2)
AnyinvestmentadviserregisteredundertheInvestmentAdvisersAct.
(3)
Anydealerregisteredpursuanttosection15oftheExchangeAct,actingforitsownaccountortheaccountsofotherqualifiedinstitutionalbuyers,thatintheaggregateownsandinvestsonadiscretionarybasisatleast$10millionofsecuritiesofissuersthatarenotaffiliatedwiththedealer,Provided,Thatsecuritiesconstitutingthewholeorapartofanunsoldallotmenttoorsubscriptionbyadealerasaparticipantinapublicofferingshallnotbedeemedtobeownedbysuchdealer;
(4)
Anydealerregisteredpursuanttosection15oftheExchangeActactinginarisklessprincipal
transactiononbehalfofaqualifiedinstitutionalbuyer;
-
421PenbrookeDrive,Suite12BPenfield,NewYork14526(585)3643065www.tesseracapital.com
Qualifiedpurchaser:
(1)
Individualswhoown$5millionininvestments,whichincludesecurities,financialcontractsenteredintoforinvestmentpurposes,cash,cashequivalentsheldforinvestmentpurposes,realestateheldforinvestmentpurposes,CDs,bankersacceptancesandothersimilarbankinstrumentsheldforinvestmentpurposes.Investmentsdonotincluderealestateheldforpersonalpurposes,jewelry,art,antiques,andothercollectibles.Debtusedtoacquiretheinvestmentsisexcludedfromthevalueoftheinvestments;
(2) Institutionalinvestorswhoown$25millionininvestments;
(3) Afamilyownedcompanythatowns$5millionininvestments;
(4)
Fortrustswithlessthan$25million,atrustwherethetrusteeandeachpersonwhocontributesassetstothetrustisaQualifiedPurchaser;
(5)
A"QualifiedInstitutionalBuyer"underRule144Aofthe33Act,exceptthat"dealers"underRule
144mustmeetthe$25millionstandardofthe1940Act,ratherthanthe$10millionstandardofRule144A.Rule144Agenerallydefinesa"QualifiedInstitutionalBuyer"asinstitutions,includingregisteredInvestmentCompanies,thatownandinvestonadiscretionarybasis$100millionofsecuritiesthatareaffiliatedwiththeinstitution,banksthatownandinvestonadiscretionarybasis$100millioninQIBsecuritiesandhaveanauditednetworthof$25million,andcertainregistereddealers;
(6)
AcompanyownedbeneficiallyonlybyQualifiedPurchasers;however,acompanywillnotbe
deemedtobeaqualifiedpurchaserifitwasformedforthespecificpurposesofacquiringthesecuritiesofferedbya3(c)(7)fund.
-
TesseraCapitalPartners,LLC Asof:
10/4/2016ThirdPartyServiceProviders
NameofProvider ServicesProvided
FrequencyofService/Typeof
Contract
Agreementonfile DateContracted Expiration AutoRenewel
ProviderBackgroundandExperienceReviewedBy:
AnnualDueDiligenceReview PrivacyPolicy NDAonFile
SocialMediaReview OFACCheck 1099/W9
bookkeeping ongoing No 4/1/2016 uponnotification
no 3/1/2016 no yes 3/15/2016LinkedInandfacebook
3/15/2016 pendingW9
401KandProfitSharingPlan
Annual Yes 9/20/2011 uponnotification
yes NoInitialonlyNoongoing
1/28/2016 No 1/27/2016LinkedInandFacebook
1/27/2016 NA
BackgroundChecks
Ongoing Yes 11/7/2013 uponnotificationNonoticeneeded
yes No 1/28/2016 No 1/27/2016LinkedInandFacebook
1/27/2016 NA
TechnologySupport
Asneeded/EngagementLetter
Yes 5/14/2010 upon2weeksnotification
yes 2/11/2016 2/10/2016 Yes 2/11/2016LinkedInandFacebook
2/1/2016 yes
HealthCare/Dental
Annual Yes 10/4/2010StartDate11/1/2010
Renewsunlesscancelled
yes No 1/28/2016 No 1/27/2016LinkedInandFacebook
1/27/2016 no
database Annual Yes 12/1/2015 11/30/2016 no No 1/28/2016 No
1/27/2016LinkedInandFacebook
1/27/2016 yes
ERISAbond Annual currentbondpolicy
10/1/2014 Renewsunlesscancelled
yes No 2/4/2016 No 1/27/2016LinkedInandFacebook
1/27/2016 no
SecuritiesDealersBond
Annual currentbondpolicy
11/1/2015 11/1/2016 yes No 2/4/2016 No
1/27/2016LinkedInandFacebook
1/27/2016 no
EmailBackupandReview
3yearterm Yes 8/3/2012for3yearterm
Autorenewel1yearatatime.90daysnoticetocancel
yes No 1/27/2016 No 1/27/2016LinkedInandFacebook
1/27/2016 no
ManagerDatabaseAnalysis
AnnualEngagementRenewsautomatically
Yes 12/1/2014 11/30/2016 no No 1/28/2016 No
1/28/2016LinkedInandFacebook
1/25/2016 no
EmailHosting Monthly Yes 11/17/2010
Monthlyrenewsunlesscancelled
yes No 1/28/2016 No 1/28/2016LinkedInandFacebook
1/28/2016 no
AccountingSoftware
monthlysubscriptionfeerenewsautomaticllyunlesscancelled
Yes 1/8/2013 Renewsunlesscancelled
yes No 1/28/2016 No 1/28/2016LinkedInandFacebook
1/28/2016 no
FINOP Engagement30Days
Yes 11/1/2007FINOPEngagement4/23/2008ServicesStart5/1/2008
30daysnotice yes 2/11/2016 2/3/2016 Yes
2/11/2016LinkedInandFacebook
2/11/2016 no
OnsiteReviewAMLtesting
Engagement No Uponcompletionofservices
no 2/1/2016 2/10/2016 Yes 2/11/2016LinkedInandFacebook
2/1/2016 no
Phishingtestandtraining
annual No 9/27/2016 9/26/2017 No No 10/4/2016 No 10/4/2016
10/4/2016 yes
-
TesseraCapitalPartners,LLC Asof:
10/4/2016ThirdPartyServiceProviders
NameofProvider ServicesProvided
FrequencyofService/Typeof
Contract
Agreementonfile DateContracted Expiration AutoRenewel
ProviderBackgroundandExperienceReviewedBy:
AnnualDueDiligenceReview PrivacyPolicy NDAonFile
SocialMediaReview OFACCheck 1099/W9
BackgroundChecks
Asneeded Yes 11/01/2014
11/1/2016willrenewatcurrentrateunlesscancelornewcontract
yes No 1/28/2016 No 1/28/2016LinkedInandFacebook
1/28/2016 no
Fax Monthly NoMonthtoMonth
9/1/2012 Atwill yes No 2/3/2016 No
2/3/2016LinkedInandFacebook
2/3/2016 no
Office Annual Yes 9/1/2015 08/31/2017needtogive120daysnotice
no No No
NoNorthForestdoesnothaveanyaccesstoconfidentialinformation
1/28/2016LinkedInandFacebook
1/28/2016 yes
payrollservices biweekly no 3/1/2016 Atwill no no 4/8/2016 no
3/16/2016LinkedInandFacebook
3/16/2016 no
junkmail/spamfilter
Annual yes 9/1/2016 9/1/2017 no No 1/28/2016 No
1/28/2016LinkedInandFacebook
1/28/2016 no
Databaseupdates
Annual Yes 5/28/2013
Renewsautomaticlyannuallyunlesscancelled
yes No 01/28/2016andconfidentiality
policyinagreement
No 1/28/2016LinkedInandFacebook
1/28/2016 yes
AnnualCEServices
Annual noinvoiceonly
1/1/2016 1/1/2017 no No 1/28/2016 No
1/28/2016LinkedInandFacebook
1/28/2016 no
RegisteredAgentProvider
annual noagreement.Seechangeofagentform&welcomeletter
9/1/2015 annual.Cancancelatanytimewithoutpenalty
no No 1/28/2016 No 1/28/2016LinkedInandFacebook
1/28/2016 no
CRMSoftware Annual Yes 12/15/2008 Renewsunlesscancelled
yes No 1/28/2016 No 1/28/2016LinkedInandFacebook
1/28/2016 no
Insurance AsperLeasingAgreement/annum
Yes 9/12/2016 Renewsunlesscancelled
yes No 1/28/2016 No 1/28/2016LinkedInandFacebook
2/1/2016 no
CreditCheck Ongoing Yes 11/17/2004
30daysnotice.Renewsunlesscancelled
yes No 1/28/2016 No 1/28/2016LinkedInandFacebook
1/28/2016 no
BackgroundChecks
Nocontract.Paybyrequest
No 1/31/2014 noneperusecharge
no No 1/28/2016 No 1/28/2016LinkedInandFacebook
1/28/2016 no
Legal HourlyEngagement/retainer
Yes 12/20/2010 uponnotification
yes 2/1/2016 2/11/2016 YesInagreement
2/03/2016LinkedInandFacebook
2/3/2016 yes
FinancialAudit EngagementAnnual
Yes 12/10/2015 Uponcompletionofservices
no 2/1/2016 2/19/2016 Yes 2/1/2016LinkedInandFacebook
2/1/2016 yes
-
SENIOR ISSUES RED FLAGS AND TIPS Monitor investor accounts for
red flags of possible abuse such as:
Client stating that they have won a Lottery or wants to deposit
their winnings into an account (Scams)
Client makes repeated calls for help resetting log-in
credentials (Diminished Capacity) A Trusted individual is directing
activity which is not normal for the account (Senior
Abuse) Client calls concerned because they have received a call
from the IRS. (Tax Schemes)
Recent Investor Alerts issued by FINRA:
Plan for Transition: What You Should Know About the Transfer of
Brokerage Account Assets on Death.
Sorry, this Ones Not a Winner: Dont Get Fooled by a Lottery Scam
Binary Options: These All-Or-Nothing Options are All-Too-Often
Fraudulent Tools of the Fraud Trade: Phones and Emotions
Registered Representatives with diminished mental capacity
Consider HIPAA Laws Develop Escalation Procedures Training on
Red Flags
Uncharacteristic errors Unexplained cancelled trades Claims of
unauthorized trades
Effective Practices Used to Protect Seniors:
Establish a Trusted Contact Placed Heightened Supervision on
Accounts where a Registered Representative has
control over an account (require prior approval) Require
reporting when a Registered Representative is made a beneficiary of
an estate Appoint a Senior Issues Assistance Point of Contact Train
Staff to Identify and Escalate Incipient Client Capacity (Outside
Experts) Keep detailed Notes of Conversations Include additional
people in meetings and calls with Seniors
-
MemberFINRA/SIPC,MARegisteredwiththeSECandMSRB
421PenbrookeDrive,Suite12BPenfield,NewYork14526 (585)3643065
www.tesseracapital.com
OutsideBusinessActivityDisclosure(NewandExistingOBAs)
Pursuant to FINRA Rule 3270, all RRs of Tessera Capital
Partners, LLC (TCP) are required
todiscloseinwritingtothefirmanyoutsidebusinessactivitiesinwhichtheyplantoengageoutsideofthescopeoftheiractivitieswithTCP.
RRsarerequiredtosubmitoneformforEACHOUTSIDEBUSINESSACTIVITY.
MANDATORYDISCLOSURE
IwishtorequestapprovalofaNEWoutsidebusinessactivityandWILLNOTENGAGEintheactivityuntilwrittenapprovalisprovidedbytheCCO.
Iwishtorecertifyoramendanoutsidebusinessactivitypreviouslydisclosedandapproved
bytheCCO.
IamcurrentlyNOTengagedinanyoutsidebusinessactivities.(SkiptoSection2)
I amcurrentlyNOTengaged in anypassive investmentsor invest in
anyprivate securities
transactions.(SkiptoSection2)
I wish to use this form to report a passive investment or invest
in any private
securitiestransactionsoutsidethescopeofTCP.(SkiptoSection2)
SECTION1BUSINESSDESCRIPTION
IherebynotifyTCPthatIamcurrentlyengagedinorintendtoengageinthefollowingbusinessorindependentactivitiesfromwhichImayderiveeconomicbenefit:BusinessNameunderwhichactivityis/willbeconducted:Myrolewiththisbusinessis/willbe(checkwhereappropriate):
Employee Officer Director Trustee Owner1 Other2
1
Ifanowner,mypercentageofownership=________%.Iflessthan100%,listotherownersandtheir%ownership
2 Ifother,pleaseexplain:
-
421PenbrookeDrive,Suite12BPenfield,NewYork14526
(585)3643065www.tesseracapital.com
DescriptionoftheOBA(includeawebsitefortheentity)InmyroleIhavecontroloftheentitiesassets:
Yes NoThisactivityisInvestmentRelated: Yes
NoIntendedStart/EndDates: Approx.timedevotedtoactivity/week:
IintendtoseekinvestmentinthisbusinessfromcustomersorTCPorothers:
Yes
NoIfYes,submitadetaileddescriptionofyourintentionsonanattachedsheettotheCCO.
Iwillbecompensatedformyrole: Yes No
IfYes,pleasedescribeyourcompensation:
Percentageoftotalannualcompensationattributabletothisactivity:________________________Please
list the names of any/all RRs, Employees, Clients or Prospective
Clients of Tessera thatis/areinvolvedinanywayinthisactivity:
SECTION2ATTESTATIONI understand that FINRA Rule 3270 prohibits
any registered person from being an employee,independent
contractor, sole proprietor, officer, director or partner of
another person, or beingcompensated or having the reasonable
expectation of compensation, from another person as aresult of any
business activity outside the scope of the relationshipwith
TCPUNLESShe/she
hasprovidedpriorwrittennoticetoTCPontheformitspecifies.If I am
using this form to report a passive investment or an investment in
a private securitiestransaction outside the scope of TCP, I have
attached a current statement copy or
relevantdocument(datedwithin90daysoftheformdate).IherebyacknowledgethatinformationIhaveprovidedonthisformregardingmyoutsidebusinessactivityiscurrentandaccurate.If
the activity is ultimately approved, I agree to notify TCP of any
material change(s) to
thisbusiness,myroleorcapacityinthebusiness,oranyotherinformationofrelevanceonanongoingbasis._____________________________________
_________________________________ RRName(Printed) RRSignature
-
421PenbrookeDrive,Suite12BPenfield,NewYork14526
(585)3643065www.tesseracapital.com
ComplianceReview:
ThisproposedactivitywillbeviewedbyTCPscustomersorthepublicaspartofTCPsbusinessbasedupon,amongotheractors,thenatureoftheproposedactivityandthemannerinwhichitwillbeoffered
ThisproposedactivitywillinterferewithorotherwisecompromisetheRRsresponsibilitiestoTCPortoitscustomers
Thisproposedactivityshouldbeviewedasaprivatesecuritiestransaction
Thisproposedactivitywillcreateaconflictofinterest
Thisproposedactivityhasamaterialrisk
Theactivityproposedinthisformistobeviewedunder:
FINRARule3270(noninvestmentrelated)or
NASDrule3040(investmentrelated)
Approval:
IapprovetheRRsparticipationinthisoutsideactivity.
IconditionallyapprovetheRRsparticipationinthisoutsideactivitybasedoncertainlimitationsorrestrictions.
IdoNOTapprovetheRRsparticipationinthisoutsideactivity.
CCOSignature Date
-
Current2016 Current2016 Current2016Name
OBANameOBADescription
StartDateInvestmentRelated?CompensationRec'd?
Doestheactivitycreateaconflictofinterest?
IsitlikelythatclientswillthinkOBAispartofTessera'sbusiness?
DoestheOBAinterferewiththeRR's
responsibilitytoTesseraorIsbusinesspartofTessera
business?AnyCommonClients?
ShouldtheOBAbetreatedasaPrivateSecurities
Transaction?Controlof3rdParty
MaterialRisk?LimitationsorConditions
OnU4?OriginalApprovalGiven
DatesofReviewReaffirmed?
Fieldsupdated(RedInk)Notes
OutsideBusinessActivityReview
-
MemberFINRA/SIPC,MARegisteredwiththeSECandMSRB
421PenbrookeDrive,Suite12BPenfield,NewYork14526(585)3643065www.tesseracapital.com
MonthlyCertifications
ReportfortheMonthof ,201
For:
(AddRepresentativesNameHere)
THISREPORTISDUETOTHECCOOFFICERBYTHE10THOFEVERYMONTH.PersonalSecuritiesTransactionCertificationAllemployeesmustreportallsecuritiestransactions,regardlessofthesizeofthetransaction.
Theonlyexceptionsare:securitiesissuedbytheUSGovernment,itsagenciesorinstrumentalities,moneymarket
instruments,shares inExchangeTradedFunds(ETFs)andshares inopenended
investmentcompanies(mutualfunds).Employeesaretomakereportsofpersonalsecuritiestransactionsmonthly.Withrespecttopersonalsecurities
transactions each reportmust cover al