2011 Firm ElementContinuing Education

Do This… Don’t Do That…Tips For Good Business Practices

The Good, The Bad, and The Just Plain Ugly

Do This… Don’t Do That…

Real examples of what you should and should not do in

your day to day business activities.

To help ensure your business is efficient, clean and well documented, this presentation will provide you real life examples of the do’s and don’ts in our industry.

Do This… Don’t Do That…

Accommodation Forgery

Required Client Documents

Mutual Fund Transactions

Correspondence and Advertising

Private Securities Transactions

Complaints and Other Legal Matters

Helpful Resources

Accommodation ForgeryDon’t….

sign any client names to documents even if the client authorizes you to.

sign any client signature “just because they missed signing one form.”

sign a deceased client signature even if it may be in their best interest.

sign forms for clients because you forgot to get them signed at the time of the transactions (i.e. brokerage mutual fund trades).

Do…have the client sign all documents themselves!

Client DocumentsDon’t…

skip questions on the NAF. mark ‘existing client’ on the NAF when the client is new

to ProEquities. forget all required supplemental forms (i.e. VAIAF, MFIAF,

DIIAF, USL, B Share Worksheet, etc.) have the client sign blank documents for future use.

Do… complete the NAF and all required documents in full. obtain CIP documents when necessary (i.e Trust,

Corporate Resolution, ID, etc.) sign under the Registered Rep section. have the clients sign all documents. submit paperwork and obtain principal approval prior to

placing transactions.

Client DocumentsMost Often Noted Mistakes

PO box with no legal address Missing telephone number No annual income and net worth Leaving occupation, company name, address, etc.

blank Failure to disclose employee affiliation Not marking an investment objective or risk tolerance Listing an expired drivers license Client did not sign the NAF Rep did not sign the NAF

Messy documents make for a messy business! …and yes, Compliance does cry over spilled milk.

VAIAF Client DocumentA Real Example

Purchase Amount of Proposed Transaction (Can be approximated) _$250,000___________

Existing Assets _$10,000 mutual funds_____________________

Liquid Net Worth$350,000___________________________________

Liquidity Needs $2,000_______________________________________

Purchase Amount as a % of Net Worth _35%_____________

Investment Time Horizon 10 years_________________________

Intended Use of the Proposed Variable Annuity: Retirement income after tax advantages growth for 10 years.___________

What’s wrong with this scenario?

Answer: Actually 72% of net worth and rollover IRA already tax advantaged

MFIAF Client Document A Real Example

Purchase Amount $98,500 Mutual Fund(s) being purchased: American High Growth A Share Funds Total Amount of Current and Planned Investments with this Fund Family:

$98,500

SALES CHARGESThe sales charges or “loads” (as presented in the prospectus) for the share

class(es) that I am purchasing are (please check one share class and indicate load as percentage of Public Offering Price):

□ A shares: _5.00____% Front-End Load (if purchasing at Net Asset Value, please indicate “NAV”)

□ B shares: Back-End Load Schedule: ____%, ____%, ____%, ____%, ____%, ____%□ C shares: _____% Front-End Load plus _____% Back-End Load for ______ Years

What’s wrong with this scenario?Answer: Near breakpoint transaction. Client should sign LOI for future addition to meet

$100,000 BP.

USL Client DocumentA Real Example

What’s wrong with this scenario?Answer: Stock symbol instead of name and no information on the mutual funds purchased.

Correspondence and Advertising

Don’t…. correspond with clients using your personal or

unregistered email. post your DBA on social media sites. Tweet! use your securities letterhead for non-

securities business.

Do…. register your email address with AdvisorMail. submit correspondence for principal review. use approved business cards and letterhead.

Correspondence and Advertising

Don’t….send ad requests without allowing 3-5 business

days for review.hold a seminar without having the seminar

materials approved.ask for reimbursement of expenses for a seminar

you didn’t get pre-approved by Compliance.use misleading tag lines (i.e. Gold Mine Financial Group).

change acronyms. (i.e. SIPC = Safe Investments Produce Cash).

advertise mutual funds or variable annuities without a FINRA review letter.

use testimonials in IA advertising.

Correspondence and Advertising

Do….be fair and balanced.include FINRA letters if available.show risk and reward.include appropriate disclosures.include all seminar materials (invitation,

slides, handouts, etc.)run spell check and proof read.

“I say, I say, what we have hereis a failure to communicate.”

Foghorn Leghorn

Correspondence and Advertising A Real Example

Wouldn’t you want to invest with no risk?

At this ‘FREE’ seminar I will teach you how to invest with no risk and gain the

highest return. Free Dinner Provided

What’s wrong with this scenario?Answer: Do we really have to explain it?

Advertising and CorrespondenceA Real ‘Good’ Example

Save the Date! Save your Paper!!

Joe Farmer & Associates are inviting you(and your friends) to our next Shredding Event

Saturday, May 21The shredding service will be located at our office parking garage at

1000 Jelly Belly Avenue, from 10:00 a.m. to 2:00 p.m.

Bring any security sensitive files, tax related documents, etc. you want to destroy.

Refreshments will be provided - please call our office with any questions: 999-123-5555

Advisory Services offered through Investment Advisors, a division of ProEquities, Inc., a Registered Investment Advisor. Securities offered through ProEquities, Inc., a

Registered Broker-Dealer, member FINRA & SIPC. Farmer & Associates is independent of ProEquities, Inc.

Private Securities Transactions

Don’t…. invest without obtaining prior Compliance approval. solicit your clients. provide advice on products not approved by

ProEquities. recommend secondary market products ProEquities

currently offers to clients (i.e. non-traded REITs).

Do…. request Compliance permission in writing for any

PST. retain all documents and approvals in your files. obtain written Compliance permission before

investing.

Complaints and Other Legal Matters

Don’t…. offer a response or settlement directly with customers. fail to disclose (or hide) your financial and/or legal

problems from Compliance. respond to any regulator without Compliance approval.

Do…. immediately forward all complaints or legal matters

(including insurance) to Compliance. (i.e. verbal or written)

notify Compliance immediately of any bankruptcy, tax lien, arrest, creditor compromise, lawsuit, etc.

immediately forward any regulatory requests to Compliance (including insurance).

OR……

Helpful Resources

AdvisorPortal – www.proequities.com

SEC - www.sec.gov

FINRA - www.finra.org

SIPC – www.sipc.org

NASAA - www.nasaa.org

IRS – www.irs.gov

Questions?

Compliance Department1-800-288-3035, option 3