Conflicts and Supervision of Associated Persons’ Outside ...Conflicts and Supervision of Associated Persons’ Outside Activities Thursday, November 9 3:00 p.m. – 4:00 p.m. Outside

© 2017 Financial Industry Regulatory Authority, Inc. All rights reserved. 1

Conflicts and Supervision of Associated Persons’ Outside Activities Thursday, November 9 3:00 p.m. – 4:00 p.m.

Outside business activities (OBAs) and private securities transactions (PSTs) are regulatory and examination priorities, as they can both result in conflicts of interest that firms must understand and mitigate. Join industry practitioners and FINRA staff as they cover conflicts arising from OBAs and PSTs, and the key legal requirements of, and practical tips for, supervising such activities. Panelists also discuss supervising dually registered advisors.

Moderator: David Greene District Director FINRA Los Angeles District Office Panelists: Whitney Bullock Chief Compliance Officer Wescom Financial Services, LLC Susana Dryden Registered Principal and Chief Compliance Officer Lighthouse Capital Group, LLC Donald Runkle Regulatory Compliance Director Coordinated Capital Securities, Inc.


Conflicts and Supervision of Associated Persons’ Outside Activities Panelist Bios: Moderator: David Greene is District Director of FINRA’s 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 FINRA’s 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 FINRA’s 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: Whitney Bullock is Chief Compliance Officer for Wescom Financial Services (WFS), a full-service broker-dealer and investment advisory firm with $1 billion in assets under management. With 16 years of experience in the securities industry, Ms. Bullock is primarily responsible for all Compliance/Legal matters at WFS including the development, implementation, and assessment of the firm’s compliance program as well as the compliance training and supervision of its 15 Financial Advisors and 20 Platform Representatives. Since joining WFS in 2000, Ms. Bullock has played a crucial role in the development and implementation of compliance procedures and was instrumental in WFS’s 2005 transition to become its own broker-dealer. Prior to being appointed Chief Compliance Officer in 2012, WFS faced the common small-firm challenge of balancing FINRA regulatory and compliance standards with production. In just two years, Ms. Bullock successfully identified procedural weaknesses within the firm and developed and implemented Supervisory Controls and Suitability guidelines that led to WFS completing its 2014 FINRA Examination without exceptions. Ms. Bullock graduated from University of North Carolina at Wilmington where she majored in Political Science. She maintains her series 7, 24, 53, 66 and 63 licenses. Susana Dryden currently serves as Registered Principal and Chief Compliance Officer for the Broker Dealer, Lighthouse Capital Group, LLC and is the Chief Operating Officer of its OSJ office, JRW Investments, Inc. Ms. Dryden began working with JRW Investments in March of 2007 and has played an integral role in developing and expanding the firm’s various departments. Ms. Dryden was primarily responsible for forming, and assists with the day to day managing of Lighthouse Capital Group, the Broker Dealer under which the representatives of JRW Investments operate. In 2016, she stepped into the Chief Operating Officer role for ExchangeRight Real Estate, an affiliate firm that is an issuer of private placement offerings. Ms. Dryden has been critical to the growth and development of the Broker Dealer, and other affiliate firms and ensures the various companies operate in compliance with the regulations instituted by FINRA and the SEC. Don Runkle is Director of Consulting Services with Freeman Mathis & Gary, LLP, and the Regulatory Compliance Director for Coordinated Capital Securities, Inc. Mr. Runkle works with broker dealers, investment advisers, and registered representatives to develop, implement, and execute strategies to mitigate or eliminate their litigation and regulatory risks. In his role with Coordinated Capital Securities, Mr. Runkle helps to ensure that the firm has appropriate processes and procedures to exceed all regulatory requirements and manage risks in an efficient and effective fashion. He also assists with the execution of all procedures as necessary, including support functions in examinations, regulatory inquiries, customer complaints, options activities, municipal bond activities, new and ongoing product


reviews, suitability analyses, and general operational and compliance functions. Mr. Runkle was previously the Chief Compliance Officer for Raymond James Financial Services, Inc., in St. Petersburg, Florida. He has more than 25 years of experience in the financial services industry, having worked as a financial advisor and in several compliance-related roles. Mr. Runkle has been an active leader in numerous industry associations and regulatory committees. He currently serves on the FINRA Membership Committee, and he was previously elected to two terms on the FINRA District 7 Committee. He has also served on the FINRA Regulatory Advisory Committee, the SIFMA Compliance and Regulatory Policy Committee, the FSI Compliance Council, and the SIFMA Compliance and Legal Society’s Regional Firms Committee. Previous industry involvement also includes the FINRA Compliance Resources and Education Committee, the FINRA Books and Records Task Force, the NASD Licensing and Registrations Council, the SIFMA Self-Regulations and Supervisory Practices Committee, the SIFMA State Regulation and Legislation Committee, and the IAFP Compliance Advisory Council. He holds numerous industry licenses, including the Series 7, 24, 53, 4, 63, 65, and previously obtained the Florida Life and Health insurance license. He also completed the Securities Industry Institute at the University of Pennsylvania Wharton School in 2004, and he has been a FINRA arbitrator since 1998.

2017 Small Firm Conference

November 8 – 9 | Santa Monica, CA

Conflicts and Supervision of Associated

Persons’ Outside Activities

FINRA Small Firm Conference | © 2017 FINRA. All rights reserved.

Moderator

David Greene, District Director, FINRA Los Angeles District Office

Panelists

Whitney Bullock, Chief Compliance Officer, Wescom Financial

Services, LLC

Susana Dryden, Registered Principal and Chief Compliance

Officer, Lighthouse Capital Group, LLC

Donald Runkle, Regulatory Compliance Director, Coordinated

Capital Securities, Inc.

1

Panelists


FINRA Rule 3270

“No registered person may be an employee, independent

contractor, sole proprietor, officer, director, or partner of another

person, or be compensated, or have the reasonable expectation

of compensation, from any other person as a result of any

business activity outside the scope of the relationship with his

or her member firm, unless he or she has provided prior written

notice to the member, in such form as specified by the member.

Passive investments and activities subject to the requirements

of Rule 3280 shall be exempted from this requirement.”

2

Outside Business Activities – The Rule


The rule requires:

Registered individuals must provide prior written notice to the Firm

Firm must assess/evaluate (See Rule 3270.01)

– Will the proposed activity interfere with, or compromise, the registered individual's responsibilities?

– Will the proposed activity be viewed as part of the firm’s business by customers or members of the public?

– Is it an Outside Business Activity or a Private Securities Transaction?

Firm can approve, approve with conditions or limitations, or prohibit

Firm must keep records of its compliance with its obligations

3

Outside Business Activities – Overview


Lack of compensation does not negate the requirement Prior Written Notice required if you’ll be “. . . an employee, independent

contractor, sole proprietor, officer, director, or partner of another person, or be compensated, or have the reasonable expectation of compensation . .”

The Rule only applies to registered persons – Firm can impose its own requirements on non-registered individuals

No duty to supervise activity, however firm should assess whether activity has evolved post approval

Prior written notice must be in the manner specified by firm

Form U4 disclosure obligations – See the “Other Business” question

Passive investments and activities subject to Rule 3280 are exempt

4

Outside Business Activities – A Few Considerations


FINRA Rule 3280

“Prior to participating in any private securities transaction, an

associated person shall provide written notice . . . describing in

detail the proposed transaction and the person’s proposed role

therein and stating whether he or she has received or may

receive selling compensation in connection with the transaction;

provided however that, in the case of a series of related

transactions in which no selling compensation has been or will

be received, an associated person may provide a single written

notice.”

5

Private Securities Transactions – Rule 3280(b)


Associated persons (“APs”) must provide prior written notice

If the AP has received or may receive selling compensation, the Firm:

must provide written approval or disapproval of the proposed transaction(s); and

has recordkeeping and supervisory obligations if it approves the transaction.

[If the Firm disapproves the transaction, the associated person cannot participate in the transaction in any manner.]

6

Private Securities Transactions – Overview


If the AP has not and will not receive any selling

compensation, the Firm:

must provide prompt written acknowledgement of the AP’s

notice; and

can, in its discretion, impose specified conditions on the AP’s

participation in the transaction(s).

7

Private Securities Transactions – Overview (cont’d)


Applies to all APs (Registered and Non-Registered)

Written Notice: Must be submitted before the PST begins to move forward – cannot be submitted simultaneously or after the completion of the transaction.

Participating “in any manner” in a private securities transaction

Referrals may qualify

Facilitating an investment, e.g., processing paperwork, transmitting funds

Recommending an investment

With limited exceptions, an AP’s personal investment can be a PST – See Rule 3280(e)(1)

8

PSTs – A Few Considerations


Your firm hired John and Joe to perform investment banking business through your firm. They have an approved d/b/a (ABC Corp.) they use for this work. You find out through a third party that ABC has consulting agreements for advisory services it performs and that ABC and John and Joe receive at least $200,000 a year from this business. Later you find out that ABC also has an affiliate (XYZ LLC) that has an agreement with another company to purchase IPO allocations.

Is ABC’s consulting business an additional OBA? What about XYZ, is that an OBA for John and Joe. Or a PST? Or neither?

9

Outside Business Activities – Is this an OBA or PST?


Examples of OBAs:

RR working for, or on the board of, a start-up company

RR with insurance license selling life settlements outside of the firm

RR providing accounting services or pension plan consulting services

RR acting as a real estate broker

RR referring member firm customers to a mortgage broker and receiving a fee

RR working outside the firm as an educator

RR is treasurer of local country club

RR on board of religious institution or civic organization

10

Outside Business Activities – Examples


Possible questions when evaluating OBAs:

What information is currently on the registered person’s Form U4?

Will the proposed activity be viewed by customers or public as

part of Firm's business? Does it pose a conflict?

Could the activity be considered a private securities transaction?

Is the business securities or investment related?

Is the business affiliated with a public company?

Is the business related to an issuer?

11

Outside Business Activities – Evaluating OBAs


Additional possible questions when evaluating OBAs:

Will the RR devote significant time to the business?

Does the OBA share office space with the Firm? Will non-

fingerprinted OBA employees have access to firm records?

What email address is being used?

Is there check-writing, trading authority / custody or control?

Any changes contemplated in the OBA that would impact a

future assessment?

12

Outside Business Activities – Evaluating OBAs (cont’d)


Should specific conditions or limitations be imposed?

No involvement with Firm’s customers in operation of OBA

No raising capital, offering securities

Periodic attestations regarding compliance with conditions

No custody / control over assets

No Web presence for registered person

Cannot operate from Firm’s premises

Limitation son how the registered person presents himself in OBA marketing

Firms may prohibit OBAs

13

Outside Business Activities – Approval & Controls


Firms must retain a record of the notification from a registered representative of the OBA. Firms have utilized annual attestations as a method to reaffirm firm policy and

document compliance.

Firms must retain a record of compliance with the obligation to evaluate the proposed activity. Retain a record of the Firm’s evaluation of the OBA.

Include details of the considerations used to evaluate the OBA.

Checklists have been utilized by firms but are less effective than methods that allow for a narrative to evidence the fulsome analysis conducted.

A member must keep a record of its compliance with these obligations specified in SEA Rule 17a-4(e)(1).

14

Record Keeping Requirements


Registered individuals failing to disclose OBAs to their firms

Associated persons failing to disclose PSTs to their firms

Procedures that don’t sufficiently detail the who, what, when and how of OBA / PST processes and approval

Disclosure forms not containing sufficient details as to the activities

Firms not adequately determining whether disclosed OBAs should be treated as PSTs under FINRA Rule 3280

15

Examples of Common Deficiencies – OBAs and PSTs


Firms not adequately memorializing review, assessment and approval of OBAs / PSTs

Firm’s list of OBAs does not align with Form U4 disclosures

Timely disclosure on the Form U4

Firms not properly supervising PSTs on an ongoing basis

Firms not properly detecting, retaining, and/or reviewing firm related e-mail correspondence sent / received through an OBA e-mail address

Failure to record PSTs on the Firm’s books

16

Examples of Common Deficiencies (cont’d)


Controls that align with the Firm’s business and structure so that any associated risks are properly mitigated

Ongoing training to individuals / principals regarding applicable regulations, guidance, and the Firm’s controls

Using FINRA OBA / PST related disciplinary actions in training

Annual attestations to disclose all OBAs / PSTs

Periodic reminders regarding responsibilities to maintain accurate Form U4s and disclosure of OBAs / PSTs prior to engaging in them

Review for undisclosed OBAs / PSTS – Independent internet searches and looking for lifestyle flags – is production in line?

17

Some Effective Practices

FINRA Small Firm Conference | © 2017 FINRA. All rights reserved. 18

Effective Practices / Practical Considerations

Practical steps firms should consider implementing: Establish clear policies and procedures.

Socialize those policies and procedures with tone from the top.

Train representatives (upon hire & ongoing).

Establish robust supervisory procedures for reviewing, analyzing and following-up on information provided by representatives.

– Review whether the activity would potentially allow the representative to carry out or conceal securities law violations.

Ensuring that the language used to report outside securities activities is detailed enough to be a fulsome disclosure that can subsequently be reviewed and supervised.

Consider implementing a tool (e.g., database) to track and monitor notices provided by the representatives along with Firm approvals, conditional approvals and rejections.


Practical steps firms should consider implementing (cont’d):

Cautioning registered representatives not to make their own assessment of whether a particular product is a security.

– Have a new product review committee established for the purpose of vetting them.

Conducting on-site surprise examinations of representatives, especially those in remote offices (e.g., independent contractor model firms have benefited from this approach).

Establishing policies and procedures regarding use of DBA names.

– Consider requiring that any DBA name be submitted to the firm for review.

19



Firms may prohibit PSTs. Ensure policies and procedures are clear.

– If exceptions are allowed, be specific.

Train to policy. Train regularly such as at least annually and document the training:

– Who, what, when, where, why & how?

– Copy of training materials retained along with list of attendees.

Conduct ongoing monitoring and surveillance. Find a way to document compliance with the policy at least annually (e.g.,

annual compliance written attestation).

Monitor communications and online activity.

Unexpected or irregular compensation received by the Firm.

20


2017 Annual Compliance Confirmation

Name of Registered Rep: JOHN BROWN

Branch Type/Supervisor/Records Keeper: OSJ/MAGGIE SMITH/MAGGIE SMITH

Disclosed Professional Designation(s): CFP

CCS‐Linked Outside Business Personal

Email [email protected] [email protected] [email protected]

Website SMITHFINANCIAL.COM

Facebook YES YES

Linked‐In YES

Twitter

Social Other

Disclosed Personal Electronic Devices: IPAD (APPROVED 2‐18‐14) IPHONE (APPROVED 9‐6‐10)

Consolidated Account Reporting: SELF‐CREATED (APPROVED 6‐10‐15) RISK‐ALYZE (APPROVED 10‐24‐16)

Disclosed Outside Accounts: SCOTTTRADE #1234‐7788, E‐TRADE #5467‐8723

Disclosed Outside Business Activity:

NAME OF BUSINESS DESCRIPTION YOUR POSITION # HOURS/M‐F

SMITH INSURANCE COMPANY LIFE INSURANCE AND FIXED

ANNUITIES INSURANCE AGENT 20

STARBUCKS COFFEE SHOP PART‐TIME

BARRISTA 0

BROWN DOWNTOWN DJ OWNER 5

FOR ILLUSTRATION PURPOSES ONLY

SIGNATURE PAGE:

By signing below, I confirm that I have disclosed all Outside Business Activities, Private Securities Transactions,

Outside Accounts, Professional Designations and electronic forms of Communication used to conduct CCS‐related

business, outside business or personal to CCS and that these activities are accurately disclosed on page one of this

confirmation. If any of the information is inaccurate I have indicated the changes in this confirmation.

By signing below, I agree to the terms of the CCS Independent Contractor Agreement.

By signing below, I hereby affirm that I agree to the following Form U‐4 pre‐dispute arbitration clause:

1. You are agreeing to arbitrate any dispute, claim or controversy that may arise between you and your firm, or a

customer, or any other person, that is required to be arbitrated under the rules of the self‐regulatory

organizations with which you are registered or registering. This means you are giving up the right to sue a

member, customer, or another associated person in court, including the right to a trial by jury, except as

provided by the rules of the arbitration forum in which a claim is filed.

2. A claim alleging employment discrimination, including a sexual harassment claim, in violation of a statute is not

required to be arbitrated under FINRA rules. Such a claim may be arbitrated at FINRA only if the parties have

agreed to arbitrate it, either before or after the dispute arose. The rules of other arbitration forums may be

different.

3. A dispute arising under a whistleblower statute that prohibits the use of predispute arbitration agreements is

not required to be arbitrated under FINRA rules. Such a dispute may be arbitrated only if the parties have

agreed to arbitrate it after the dispute arose.

4. Arbitration awards are generally final and binding; a party’s ability to have a court reverse or modify an

arbitration award is very limited.

5. The ability of the parties to obtain documents, witness statements and other discovery is generally more limited

in arbitration than in court proceedings.

6. The arbitrators do not have to explain the reason(s) for their award unless, in an eligible case, a joint request for

an explained decision has been submitted by all parties to the panel at least 20 days prior to the first scheduled

hearing date.

7. The panel of arbitrators may include arbitrators who were or are affiliated with the securities industry, or public

arbitrators, as provided by the rules of the arbitration forum in which a claim is filed.

8. The rules of some arbitration forums may impose time limits for bringing a claim in arbitration. In some cases, a

claim that is ineligible for arbitration may be brought in court.

«REPRESENTATIVE» Signature: Date:

CCS Compliance Department: Date:

Name of person conducing this analysis:

Date of analysis:

Pursuant to FINRA Rule 3270, the following is an analysis of the Outside Business Activities of the registered representatives of the firm.

Name of registered rep:

Describe the Outside Business Activity:

Yes No N/ADid the rep request approval prior to engaging in the business?

Did the firm approve the activity in writing?

Has the Outside Business Activity been appropriately disclosed on the Form U4?

Has the firm implemented supplemental supervisory procedures to monitor this activity?

Describe the procedures or the reason that the Firm does not believe that these procedures are necessary:

Yes No N/ADoes the firm believe that the outside business will interfere with or compromise the registered person's responsibilities to the firm and/or its customers?

Yes No N/ADoes the firm believe that the Outside Business Activity will be viewed by customers or the public as part of the firm's business?

If no, please describe why:

Yes No N/ABased on all of the factors discussed above, does the firm believe that this Outside Business Activity is appropriate?

Yes No N/ABased on a review of the Outside Business Activity, does the firm believe that any restrictions or limitations should be imposed on the registered rep?

If no, please describe why:

Lighthouse Capital GroupRule 3270 Outside Business Activity Analysis

Yes No N/AShould the Outside Business Activity be classified as Private Securities Transactions?

If yes, how will this business be supervised?

Signature

Lighthouse Capital Group, LLC 200 South Los Robles Avenue, Suite 210, Pasadena, CA 91101

Securities offered through Lighthouse Capital Group, LLC, Member FINRA/SiPC

Page 1 of ______

Representative Name: _____________________________

Outside Business Activities Disclosure

Please complete and submit with applicable exhibits to [email protected]

Registered Representatives are required to provide notification to LCG regarding outside business activities prior to engaging in the activity. Written request is subject to Compliance approval. Outside business activities include any activity that is outside the scope of your broker-dealer. Such business includes acting as a proprietor, partner, officer, director, trustee, power of attorney, consultant, employee, agent, or having any financial interest in another business or organization. Outside business activities also include non-compensated positions for which you have a fiduciary duty (president, treasurer, or any other officer position for a non-profit board of trustees).

I AM NOT engaged in any outside business activities.

____________________________________________________________________________

Please submit all activity description exhibits with this request form. Your request to engage in the activities will be reviewed and written notification regarding approval or rejection will be provided within 10 days

______________________________________________________________________________

Acknowledgement:

• I certify that I have disclosed all required outside business activities in the attached exhibits and I hereby affirm this information to be accurate and truthful to the best of my knowledge.

• I understand that I have an ongoing obligation to obtain written verification from the firm prior to engaging in any new outside business activities or changes in my disclosed activities.

• I understand that under FINRA rules, the firm has an obligation to supervise its Registered Representatives. While the firm does not directly supervise outside business activities, I understand the firm, in order to meet its obligations, may from time to time request access to the books and records relating to my outside business activities, and I hereby agree to provide them.

• I understand the requirement to disclose outside business activities is a regulatory requirement and providing this disclosure, as well as cooperation and access to books and records is deemed to be a condition of my registration and failure to do so may result in disciplinary action, including possible termination.

______________________________ ____________ Representative Signature Date

______________________________ ___________________________ Compliance Office Name Signature Date Obligations of Member Receiving Notice. Upon receipt of a written notice under Rule 3270, a member shall consider whether the proposed activity will: (1) interfere with or otherwise compromise the registered person's responsibilities to the member and/or the member's customers or (2) be viewed by customers or the public as part of the member's business based upon, among other factors, the nature of the proposed activity and the manner in which it will be offered. Based on the member's review of such factors, the member must evaluate the advisability of imposing specific conditions or limitations on a registered person's outside business activity, including where circumstances warrant, prohibiting the activity. A member also must evaluate the proposed activity to determine whether the activity properly is characterized as an outside business activity or whether it should be treated as an outside securities activity subject to the requirements of NASD Rule 3040. A member must keep a record of its compliance with these obligations with respect to each written notice received and must preserve this record for the period of time and accessibility specified in SEA Rule 17a-4(e)(1).

I AM engaged in outside business activities. Please see attached exhibits for detailed descriptions.

mailto:[email protected]

http://finra.complinet.com/en/display/display.html?rbid=2403&element_id=3727



Rep Name _____________________________________ Rep Signature_____________________________________ Date

Exhibit A GENERAL OUTSIDE BUSINESS ACTIVITIES DISCLOSURE - SUBMIT ONE EXHIBIT FOR EACH ACTIVITY

Attorney, CPA, Tax Professional, Board Fiduciary Positions, Real Estate Agent/Broker, Trustee, POA, and Mortgage activities include additional disclosure requirements on Exhibit B.

1. Are you (Please select only one box.): Disclosing a new activity?

Updating a previously disclosed activity? Date of activity/role change: ____/____/_____

Ending a previously disclosed activity? End date for a previously acknowledged activity: ____/____/_____

2. If disclosing a new activity, are you already engaged in the activity? YES NO If “Yes”, what was the start date? ____/____/_____

If “No”, what is the anticipated start date for new activity: ____/____/_____ (allow 10 days for review & processing)

3. Legal name of business or entity, and any DBAs: ___________________________________________________________

4. Title(s):_______________________________________________________________________________________________

5. Duties/responsibilities: _________________________________________________________________________________

_____________________________________________________________________________________________________

6. Street address: ___________________________________ City, State, Zip Code: _______________________________

Web site address: _________________________________ 7. Do you have an ownership interest? YES NO If “Yes”, what is the percentage? ___________________

8. Total hours/mo. devoted to this activity? _______ How many are during securities trading hours? _________________

9. Annual compensation: $__________________ Compensation details (e.g. fees, commission, salary, etc.): ______________

_____________________________________________________________________________________________________

11. Does this activity involve any securities clients? YES NO

If “Yes”, please describe the involvement with these clients: ____________________________________________________

_____________________________________________________________________________________________________

12. Does this activity involve securities activities other than through Lighthouse Capital Group, LLC? YES NO

If “Yes”, please provide details: ___________________________________________________________________________

_____________________________________________________________________________________________________ FOR LCG USE ONLY: APPROVED NOT APPROVED (see comments)

COMPLIANCE OFFICER/SUPERVISOR: ___________________________________________________ DATE: ______________

SIGNATURE: ______________________________________________ REP NOTIFICATION DATE: ______________

REJECTION DETAILS OR RESTRICTIONS: ____________________________________________________________________________________________________________

__________________________________________________________________________________________________



EXHIBIT B SPECIFIC OUTSIDE BUSINESS ACTIVITIES

Please complete the appropriate section below if you are disclosing these specific activities: Attorney, CPA, Tax Professional, Board Fiduciary Position, Real Estate Agent, Trustee, POA, and Mortgage Activities.

Please attach a page if you require additional space to respond. A.) Trustee, Guardian, P.O.A., etc.

1. Are you a trustee, trust protector, guardian, Power of Attorney, or in any similar capacity? YES NO

If “Yes”, please explain: ________________________________________________________________________________

____________________________________________________________________________________________________

B.) CPA, Tax or A.R. /A.P. Professional

1. Do you perform bill-paying services? YES NO If “Yes”, please explain: ________________________________

_____________________________________________________________________________________________________

2. Are you a CPA or licensed Tax Professional? YES NO If “Yes”, please provide credentials and/or licenses, the

dates they were obtained, and the states where they are active: _______________________________________________

_____________________________________________________________________________________________________

3. Attach copies of any standardized contracts and/or agreements entered into with clients.

C.) Real Estate Agent or Broker

1. Types of properties you sell: _____________________________________________________________________________

2. List states in which you are licensed to sell real estate: ________________________________________________________

3. Real Estate Agent/Brokerage License #: ____________________________________________________________________

4. Real Estate Brokerage: _________________________________ Number of Agents you supervise (excl. yourself): ________

5. Are you involved directly or indirectly with any time-share properties, limited or general partnerships or investor groups?

YES NO If “Yes”, please explain: _______________________________________________________________

D.) Mortgage Activities

1. Do you act as a loan originator? YES NO

2. Do you refer clients to another mortgage company(ies)? YES NO If “Yes”, please complete the following:

a. Name of referral mortgage company: ________________________________________________________________

b. Please describe your relationship with the mortgage company: ___________________________________________

3. Have the proceeds from any mortgage or refinancing originated by you, or referred by you, been used to

purchase securities? YES NO If “Yes”, please provide the client name(s), type of product(s) purchased and

dollar amount involved for each investment: ______________________________________________________________

4. Lender License #s and States: ___________________________________________________________________________

5. Number of Agents you supervise (excl. yourself): ________________



E.) Board Fiduciary Positions

1. Legal name of business activity ________________________________________________________________________

2. How many members are on the board? ___________

3. Do you have any authority or control to disperse funds? YES NO

a. If “Yes”, are there checks and balances in place that require other signatures? _______________________________

4. Do others on the board or committee look to you for investment recommendations or financial advice? YES NO

5. Are you the registered representative for any board accounts? (NOTE: Registered representatives are generally

prohibited from being the rep of record for any accounts of the entity.) YES NO

6. Do you plan to solicit board members or other employees to be securities clients? (NOTE: Generally, Lighthouse Capital

Group, LLC, prohibits representatives from soliciting or having other board members as clients due to the potential for

conflicts of interest) YES NO

7. Is fund raising involved? YES NO

a. If “Yes”, describe fully how this activity works and your involvement. ______________________________________

________________________________________________________________________________________________

8. Are you on any finance or investment decision making committees? YES NO

a. If “Yes”, explain in detail your roles and responsibilities. _________________________________________________

________________________________________________________________________________________________

200 South Los Robles Avenue Suite 210, Pasadena, CA 91101 Securities offered through Lighthouse Capital Group, LLC, Member FINRA/SIPC

PRIVATE SECURITIES TRANSACTION FORM (3040 DOCUMENT)

Representatives are required to provide information regarding proposed private securities transactions PRIOR to engaging in them, as required by SRO rules. This form must be completed and submitted to the Compliance Dept., which will acknowledge or reject the request and notify the registered representative. NOTE: ONE TRANSACTION PER FORM.

Proposed Securities Transaction

Company Name: ______________________________________________

Company Address:___________________________________________________________

Nature of transaction (real estate planning, limited partnership, etc):_________________________________

Anticipated Investment Amount or Account Value:________________________________________________

Anticipated Initial Transaction Date:____________________________________________________________

Compensation Arrangement (asset-based fee, performance based fee, transaction-based commission referral fee, etc): _________________________________________________________________________________

What is your expected income/return? _________________________________________________________

Explain your proposed involvement, responsibilities and powers, including any title you will hold:__________

_________________________________________________________________________________________

_________________________________________________________________________________________

Attached any documents which you believe would be useful in the Firm’s consideration of your request.

Representative Acknowledgment – I hereby represent that the information provided herein is true and correct to the best of my knowledge, and understand that I am to immediately notify my Compliance Department of any change to this information. I also understand that the firm may request additional information from me, such as offering documents or summary of terms, before make a decision.

_________________________________ ______________________________________ ______________________

Registered Representative Signature Printed Name Date

FOR COMPLIANCE USE ONLY: Date received:________ Reviewed by:___________________________

Acknowledgement Date:________ Rejection Date:________ Notified RR Date:________________________

Branch Examination – Outside Business Activity

Review Annual Compliance Confirmation (ACC): FOR UN‐ANNOUNCED EXAMS, COMPLETE DURING INTERVIEW ON‐SITE

Have any RR’s reporting to the Branch disclosed outside business activity?

No – complete OBA training below Yes – see ACC

Are there any changes to outside business activity?

No – complete OBA training below Yes ‐ notify compliance Yes – update ACC

After providing the additional training below, does the RR need to disclose or update an outside activity?

No Yes ‐notify compliance

Do any changes require a U4 update? No Yes ‐ notify licensing and registration N/A

Pre‐Audit Review

Do disclosed OBA’s align with the RR’s CRD (U4) Record?

No ‐ notify licensing and registration Yes

Email Review: Was there any evidence of undisclosed outside business activity?

No Yes – notify compliance

Google Search: *attach results Was there any evidence of undisclosed outside business activity?


On‐Site Review:

In reviewing customer correspondence and communications (i.e. correspondence addressed to a different business, separate business cards, manner of which the phone is answered, etc.), was there any evidence of undisclosed outside business activity?


In the review and approval of checks received and forwarded blotter were there any checks that are not made payable to the clearing firm or a fund company, that may be a red flag for undisclosed outside business activity?


In reviewing retail communications at the Branch, including social media or websites, was there any evidence of undisclosed outside business activities?


BRANCH INTERVIEW/INSPECTION (OUTSIDE BUSINESS ACTIVITIES):

Describe any changes to outside business activities disclosed to CCS: None Described below

Describe any noted exceptions to firm procedures for outside business activity during the email review or google search:

None Described below

Describe any noted exceptions to firm procedures for outside business activity during review of retail and on‐line communications and any marketing materials made available to the public or to customers at the Branch:


Describe any noted exceptions to firm procedures in the review of Branch books and records (branch’s checks received and forwarded blotter, correspondence, client files, complaint file, etc.)


TRAINING REQUIREMENT check here to confirm training was provided

Outside Activities requiring prior notification

Serving in the specific role of an employee, independent contractor, sole proprietor, officer, director, or partner in which you will NOT be compensation or expect compensation.

Serving in the specific role of an employee, independent contractor, sole proprietor, officer, director, or partner in which you will be compensated or expect compensation.

Serving in in any role in any OBA in which you will be compensated or expect compensation.

Activities Not Considered as Outside Business Activities

Serving in the any role other than an employee, independent contractor, sole proprietor, officer, director, or partner in which you will NOT be compensation or expect compensation. (examples: unpaid volunteer work, Little League Coach, Homeowners Association Board Member, etc.)

Prior Notification RR must receive prior approval from CCS before engaging in the proposed activity. RR’s must submit the OBA Form to Compliance for Review.

Changes to Previously Disclosed OBA’s It is the RR’s responsibility to inform CCS any time there is a material change in disclosed outside business activities. These changes include number of hours per week spent on activity, change in title or responsibility, change in location where activity is conducted, change in compensation, and termination of an outside activity. These changes may result in an amendment to the RR’s Form U‐4 and may require review and approval by CCS, depending the change. RR’s are required to confirm any disclosed outside activities annually on the Annual Compliance Confirmation.

Private Securities Transactions Review ACC provided by Rep: FOR UN‐ANNOUNCED EXAMS, COMPLETE DURING INTERVIEW ON‐SITE

Have any RR’s reporting to the Branch disclosed private securities transactions to CCS?

No – complete PST training below Yes – see ACC

Are there any changes to disclosed private securities transactions?

No – complete PST training below Yes ‐notify compliance Yes – update ACC

After providing additional training, does the RR need to disclose or update a private securities transaction?

No Yes ‐notify compliance

Pre‐Audit Review:

Review firm records, are there any previously disclosed private securities transaction that are no longer active?

No Yes – Describe in next section

Review firm records for disclosed OBA’s at Branch. Are there any OBA’s that require additional review to ensure they are not a private securities transaction?

No Yes – Describe:

BRANCH INTERVIEW/INSPECTION (PRIVATE SECURITIES TRANSACTIONS):

Describe any changes to private securities transactions disclosed to CCS: None Described below

In conducting your review and interview, is there any evidence of 1. undisclosed private securities transactions 2. inactive private securities transactions that are active 3. OBA’s that may be a private securities transaction


TRAINING REQUIREMENT check here to confirm training was provided

Private Securities Transactions: The definition of a private securities transactions is quite broad and literally covers "any" securities transaction outside of CCS.

Prior Notification: It is the RR’s responsibility to provide prior written notice (Private Securities Transaction Form) to CCS before undertaking or engaging in a private securities transaction. Prior notification is required whether you will be compensated (or expect compensation) or you will not. This includes private securities transactions for the RR’s own account. Compensation is defined as “Selling compensation" under the rule. Selling Compensation is any compensation paid directly or indirectly from whatever source in connection with or as a result of the purchase or sale of a security. RR’s are prohibited from undertaking or engaging in any disclosed private securities transaction until CCS has provided written notification that the activity is approved or the activity is approved subject to any specified conditions. If denied, CCS will provide written notice and you are not allowed to undertake or engage in the activity.

Changes to Previously Disclosed Private Securities Transactions It is the RR’s responsibility to inform CCS any time there is a material change in disclosed private securities transactions including the dissolution of a previously disclosed private securities transaction. RR’s are required to confirm any disclosed private securities transactions annually on the Annual Compliance Confirmation.

Annual Registration & ComplianceQuestionnaire - 2016 Update

Part 2

FINRA Form U4 UpdatesAll registered persons have a continuing obligation to maintain current information disclosedin the respective FINRA Form U4. Any updates or changes to the information previouslyreported on an individuals' Form U4 should be reported to the WFS Registration Departmentand must be filed within 10 days of the event that triggers the reporting requirement. WFSwill file all required Form U4 amendments on your behalf based on the information youprovide. In addition to annual updates, you must immediately advise in writing of anychanges to the information requested below (including address changes) so that a Form U4amendment is timely.

Additionally, FINRA has enhanced the CRD Snapshot Report to allow registeredrepresentatives to obtain their own CRD snapshot report directly from FINRA, by clicking onthis request link. Request your Snapshot Report from Web CRD/IARD. WFS encourages eachlicensed individual to also access and review their Snapshot report made available by FINRA.Report any needed changes or questions to the WFS Registration Department.

The following questions 1 - 8 directly relate to the information filed on your FINRA Form U4.

Please review each question carefully. Due to regulatory reforms, some questions mayhave been revised. FINRA regularly assesses sanctions/fines in response toRepresentatives' actions that may have been avoided with proper disclosures or athorough understanding of regulatory and firm requirements. Thus, a correct andaccurate response is essential.

FINRA Form U4 Information

U4-1 I acknowledge that I must be properly securities registered and approved in eachstate in which I offer investment advice, solicit the purchase or sale of securities,maintain client accounts or otherwise transact business. I also understand that I amresponsible for obtaining and maintaining an insurance license in each state where Isolicit the purchase of insurance and/or annuity products, and I understand that I mustbe insurance licensed in the state where the application is signed by the client and maybe required to obtain an insurance license in the state where the client lives, accordingto state insurance regulations.

I Agree and Acknowledge

DISCLOSURE INFORMATION

WFS will file the appropriate Form U4 Disclosure information on your behalf. Youmust immediately supply the required information below to the WFS ComplianceDepartment whenever an event occurs that requires disclosure or there are changesto prior disclosures. WFS will contact you if any follow-up is needed. Disclosureinformation includes, but is not limited to:

https://crd.finra.org/AnonAccess/AllowReps/AccessIndvlData.aspx

Financial disclosure events (e.g., bankruptcies, unsatisfied judgments and liensand compromises/settlements with creditors, include short sales)Customer complaints (e.g., investment-related consumer-initiated)Criminal events (e.g., felony charges and convictions, certain misdemeanorcharges and convictions involving any fraud, false statements, theft of money,bribery, forgery etc.)Civil judicial events (e.g., investment-related injunction or civil action)Regulatory actions (e.g., violations, restrictions, suspensions, bars)

NOTE: Failure to fully disclose material Form U4 information can result inregistration termination by Wescom Financial Services, LLC.

U4-2 Since the completion of your last Annual Compliance Questionnaire, have any ofthe following events occurred:

Been arrested or charged with any crime (any type of felony or misdemeanors)

Had a Regulatory Action levied by FINRA, state jurisdiction or insurance regulator

Had received a written or verbal customer complaint not brought to theattention of the WFS Compliance Department

Filed for bankruptcy, or had an unsatisfied judgment or lien levied against you,or entered into an agreement with any type of creditor to satisfy a debt for lessthan the full amount owed

Other previously omitted disclosure information

None of the above have occurred since 01/01/16

U4-3 Please briefly describe new, and/or previously omitted Disclosure Informationbelow. The WFS Registration Department will contact you for full details.

N/A

U4-4 Has the U.S. Securities and Exchange Commission or the Commodity FuturesTrading Commission ever: (select all that apply)

Found you to have willfully violated any provision of the Securities Act of 1933,the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, theInvestment Company Act of 1940, the Commodity Exchange Act, or any rule orregulation under any of such Acts, or any of the rules of the Municipal SecuritiesRulemaking Board, or found you to have been unable to comply with anyprovision of such Act, rule or regulation?

Found you to have willfully aided, abetted, counseled, commanded, induced, orprocured the violation by any person of any provision of the Securities Act of1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940,the Investment Company Act of 1940, the Commodity Exchange Act, or any ruleor regulation under any of such Acts, or any of the rules of the MunicipalSecurities Rulemaking Board?

Found you to have failed to reasonably supervise another person subject to yoursupervision, with a view to preventing the violation of any provision of theSecurities Act of 1933, the Securities Exchange Act of 1934, the InvestmentAdvisers Act of 1940, the Investment Company Act of 1940, the CommodityExchange Act, or any rule or regulation under any of such Acts, or any of therules of the Municipal Securities Rulemaking Board?

None of the above have occurred.

U4-5 Has any self-regulatory organization or commodities exchange ever: (select allthat apply)

Found you to have willfully violated any provision of the Securities Act of 1933,the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, theInvestment Company Act of 1940, the Commodity Exchange Act, or any rule orregulation under any of such Acts, or any of the rules of the Municipal SecuritiesRulemaking Board, or found you to have been unable to comply with anyprovision of such Act, rule or regulation?

Found you to have willfully aided, abetted, counseled, commanded, induced, orprocured the violation by any person of any provision of the Securities Act of1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940,the Investment Company Act of 1940, the Commodity Exchange Act, or any ruleor regulation under any of such Acts, or any of the rules of the MunicipalSecurities Rulemaking Board?

Found you to have failed to reasonably supervise another person subject to yoursupervision, with a view to preventing the violation of any provision of theSecurities Act of 1933, the Securities Exchange Act of 1934, the InvestmentAdvisers Act of 1940, the Investment Company Act of 1940, the CommodityExchange Act, or any rule or regulation under any of such Acts, or any of therules of the Municipal Securities Rulemaking Board?

None of the above have occurred.

U4-6 WFS policies limit political contributions by registered representatives, theirsupervisors (Program Managers and OSJ Managers) and their immediate family membersto the following:• No more than $350 per official per election if you are eligible to vote in the applicablejurisdiction• No more than $150 per official per election if you are not eligible to vote in theapplicable jurisdiction• Volunteering for a campaign is generally allowed by the rule and policies, but theactivity needs to be approved via an Outside Business Activity form• Registered representatives and supervisors will need to complete the PoliticalContributions form found in the FINRA Registration and Licensing section of dataVISION ifthey have made a political contribution within the past two years. I confirm that I amcompliant with WFS policy on Political Contributions.

Yes No

U4-7 I acknowledge that I have a continuing responsibility to promptly report anyupdates or changes to the information contained in my FINRA Form U4 to WFSCompliance/Registration Department. Information that should be maintained currentlywith the Compliance/Registration Department includes, but is not limited to: residentialaddress, engagement or ceasing engagement in any outside business activity, reportingthe receipt of notification of liens, garnishments, bankruptcy filing or other compromiseswith creditors in any manner, suspension or revocation of any professional license,receipt of a customer complaint or changes in details to prior firm customer complaintsand/or any item inquired of in a background review response.


U4-8 Investment Advisor Representatives (IARs)WFS Policy states that IARs will provide a current copy of the WFS Form ADV Part 2A(Firm Brochure) and ADV Part 2B (Brochure Supplement) to each prospective client eitherprior to or at the time of entering into an advisory agreement with a client.

I provide a current copy of the WFS ADV Part 2A and my ADV Part 2B to prospectiveclients and/or existing clients when I initially discuss an advisory product with them. Iam aware of how to update and how to locate the current version of my ADV Part 2B.


I am not a producing Investment Advisor Representative

Annual Compliance Review

AC-1 INSIDER TRADING: The term "Insider Trading" as defined in the Securities FraudEnforcement Act of 1988 generally prohibits:

Trading by an insider, while in possession of material nonpublic information, orTrading by a non-insider, while in possession of material nonpublic information,where the information either was disclosed to the non-insider in violation of aninsider's duty to keep it confidential or was misappropriated, orCommunicating material nonpublic information to others, i.e. disseminating("tipping") such information to others who may trade the security.

WFS policy prohibits any registered representative, associated person or employee fromtrading in securities while in the possession of material, nonpublic information. Arepresentative who has reason to believe that he/she or a customer is in the possessionof "insider information" should contact WFS Compliance Department prior to trading.

Do you acknowledge that you clearly understand the WFS policy on Insider Trading?


AC-2 PRIVATE SECURITIES TRANSACTIONS - SELLING AWAY: No person associated withWFS shall participate in any manner in a private securities transaction without priorCompliance Department approval. Private securities transactions are defined as anysecurities transaction, including promissory notes and similar instruments, outside theregular course or scope of an associated person's employment with WFS. For compellingreasons, exceptions may be granted by the Chief Compliance Officer or his/her delegate.A written request for prior approval must be submitted to the Chief Compliance Officerdescribing the proposed activity in detail. No sales compensation will be allowed on anyapproved private securities transactions.

Do you acknowledge that you clearly understand the WFS policy on Private SecuritiesTransactions - Selling Away?


AC-3 FIXED INSURANCE - SELLING AWAY: All sales of fixed insurance products must beconducted through WFS or a marketing organization that is appointed through WFS. On anexception and limited basis only, representatives may be approved by Compliancethrough the Outside Business Activities process to engage in the sale of certain fixedinsurance products away from WFS.

Do you acknowledge that you clearly understand the definition of Fixed Insurance -Selling Away and the WFS policy regarding such activity?


AC-4 Do you offer investment advice, solicit the purchase or sale of securities,maintain client accounts or otherwise transact business in a branch located on a militarybase or installation?

Yes No

If yes, please provide the address of this location below

AC-5 Have you directly or indirectly given to or accepted from any client, investmentsponsor, affiliate of an investment sponsor, or direct participation program, any giftvalued in excess of $100.00 per person, per sponsor, annually? Or, have you accepted anyof the above-described gifts valued less than $100.00 that have not been reported toyour OSJ Manager?

Yes No

AC-6 Have you directly or indirectly received any commissions for participation in anysecurities transaction from any person or entity other than WFS?

Yes No

AC-7 Have you shared securities commissions or compensation with any unregisteredperson, or person registered with another broker/dealer?

Yes No

AC-8 Have you borrowed or loaned money or securities from or to any customer orprospective customer, excluding immediate family?

Yes No

AC-9 Are you named as a trustee, successor trustee, co-trustee, power of attorney,executor, joint tenant, or beneficiary for anyone other than an immediate familymember over any client assets?

If YES, name relationship and capacity below.

AND/OR

Have you provided financial guidance or assistance on any financial institution accountoutside of your capacity with WFS for anyone other than an immediate family member?

If YES, explain the type of business and whether or not it has been previously disclosedon an outside business activity form.

Yes No

AC-10 Do you generate any income from sources other than WFS business? Note:exclude passive investment related income.

Yes No

AC-11 I understand that it is my responsibility to report any written or verbal customercomplaints, litigation, arbitration or investigation by any court or regulatory body or anyknown or suspected violation of securities regulations of firm policy and proceduresinvolving WFS or an associated person of WFS to the WFS Compliance Departmentimmediately following receipt of such information. I acknowledge that I am prohibitedfrom making any settlement of a claim by a customer without the express writtenconsent of the WFS Compliance Department.


OUTSIDE BROKERAGE OR SECURITIES ACCOUNTS

Prior to opening a brokerage account with a broker/dealer other than WFS, youmust notify both WFS and the executing broker/dealer in writing of your associationwith the other. Moreover, upon opening a securities account with an investmentadvisor, bank or other financial institution, you must disclose the existence of theaccount to WFS by completing an Accounts Held at Brokerage Firms form. Thedisclosure requirement applies to any securities account in which an associatedperson has a financial interest or discretionary authority. Accounts held directly atmutual fund and/or insurance companies and third party managed accounts areexcluded from this requirement.

You are considered to have a "financial interest" in a brokerage or securities accountif you have the opportunity, directly or indirectly, to profit or share in the profitsderived from any securities or transactions in the account. An example of anindirect interest in an account would be an account held by members of yourimmediate family, particularly your spouse, with whom you share the samehousehold.

AC-12 The brokerage accounts previously reported to WFS and appearing on myRegistration Data page in dataVISION are current and accurate, or I have reportedchanges in part 1 of this survey. Please note the "date stopped" column to verifyaccounts that are no longer active.


AC-13 Prior to opening a brokerage account with a broker/dealer other than WFS asdescribed above, I understand that I must notify the WFS Compliance Department bysubmitting an Accounts Held at Brokerage Firms Disclosure form for this purpose.


OUTSIDE BUSINESS ACTIVITIES

Pursuant to FINRA rule 3270, "Outside Business Activity" (OBA) means beingemployed by, or accepting any direct or indirect compensation from, any personfor any business activity outside the scope of your relationship with WescomFinancial Services, LLC and/or the Financial Institution you are associated with.

Before engaging in any OBA, whether as an officer, director, partner, broker,proprietor, trustee, part-time employee or otherwise, you must provide WFSwith prompt written notification of your intent to engage in the activity. Anyupdates to your OBA status must be reported to WFS immediately. To report anynew or contemplated OBA or any updates that arise between annual disclosures,you must complete the WFS "Outside Business Activities Disclosure" form andsubmit this form to WFS for prior approval.

OBA include but are not limited to:

Officer or director of publicly or privately held companyReal estate sales, consulting, pension administrationService companies (e.g., legal, accounting, tax, medical benefits)Affiliations with life insurance companies or Advisors other than WFSFees from sources such as family businesses, hobby income, publicspeaking, teaching, writing periodicals and/or books, product sales(AMWAY, Avon, etc.)Income from rental propertyFinancial Institution duties outside of the Investment Services duties(notary, new accounts clerk, teller, etc.)

AC-14 The Outside Business Activities previously reported to WFS and appearing on myRegistration Data page in dataVISION are current and accurate, or I have reportedchanges in Part 1 of this survey.


AC-15 I understand that before engaging in any Outside Business Activity as describedabove, I must provide the WFS Compliance Department with prior written notification ofmy intent to engage in the activity. I must use an Outside Business Activities Disclosureform for this purpose. I understand I am not to engage in the activity until I havereceived prior approval to do so from the WFS Compliance Department.


AC-16 For electronic communications, I understand that I may ONLY use my WFSapproved e-mail address to conduct or discuss any WFS related business activities. Ifurther understand that I am prohibited from using non-WFS approved e-mail addressesor personal websites, chat rooms, blogs, social networking sites (such as Linked In,Facebook, Twitter, etc.), texting or instant messaging to conduct or discuss any WFSrelated business activities unless previously approved by WFS. Finally, I understand that Imay not use my WFS approved e-mail address to conduct outside business activities.


AC-17 I understand that my approved WFS email is captured and surveilled by WFS.


AC-18 It is my responsibility to promptly report any gifts and/or product vendorreimbursement to WFS as supervising broker-dealer. I understand that if I receive anykind of sales or marketing support, I must complete the required WFS Product ProviderSponsorship Approval form in its entirety and submit to WFS Compliance for approvalalong with accompanying receipts (if applicable) or vendor payment checks. I understandthat all vendor reimbursements must be reported to WFS Compliance whether a productvendor pays a service provider directly for an expense or if I am provided with a checkmade payable to WFS for subsequent expense reimbursement. I understand that I maynever receive direct payments from a product sponsor for reimbursements.


AC-19 Retail Communication (advertising and sales literature) distributed or madeavailable to the public must be used in accordance with policies established by WFSrequiring review and approval by the WFS Compliance Department. Certain trainingpieces and other "not for public distribution" materials are similarly subject to the samerequirements. I agree to submit all such communications for review and approval inaccordance with established procedure and to disclose WFS as my broker/dealer on salesmaterial, correspondence, electronic communications, and during public seminarsconcerning WFS products and services.


AC-20 I acknowledge that I am prohibited from making changes to forms or documentspreviously signed without obtaining an additional signature and/or initials from thesigner(s) acknowledging the changes.

I acknowledge that I am prohibited from having anyone sign an incomplete and/or blankform.


AC-21 I acknowledge that I am NOT allowed to (i) forge signatures or initials of myclients under any circumstances, (ii) vote proxies on behalf of clients, (iii) act as powerof attorney for anyone other than an immediate family member without prior writtenapproval from the Chief Compliance Officer.


AC-22 If I work with a licensed or unlicensed sales assistant, joint representative, orother sales support staff, I am aware that I am responsible for all business and/ordocumentation submitted on my behalf for the customers for which I am representativeof record.


AC-23 I have read, understand, and abide by Compliance Memorandum 2008-10 andthe Compliance Manual Chapter 11 Privacy Policy & Data Security regarding InformationSecurity Best Practices including policies related to device integrity, e-mail security,login security, mobile device usage, secure wireless access, social engineering, andgeneral physical security.


AC-24 I acknowledge that I have reviewed, in its entirety, the WFS ComplianceManual, including the AML policies and Compliance Memos posted on dataVISION andunderstand my responsibility to follow the current policies and procedures as outlinedtherein.


AC-25 I acknowledge that I have read and understand WFS's Code of Ethics ("theCode"). I accept responsibility for complying with and when appropriate, seekingguidance regarding the Code. I will report known or suspected violations of the Code tothe WFS Compliance Department.


AC-26 I acknowledge that I have personally completed/will personally complete allrequired or requested firm element, state insurance continuing education courses and/orproduct specific training myself. I have not had, nor will I request that any other personcomplete any portion of my education courses, trainings or attestations.


ATTESTATION: I have typed my name below to attest to the completeness and accuracyof this record. I recognize that this typed name constitutes, in every way, use or aspect,my legally binding signature.

1 | P a g e

Examiner Name: _____________________________ Rep Name: _______________________________________

Program/DBA Name (if applicable): ___________________________________________

OSJ Manager Name: ___________________________________________

1. Annual Compliance Questionnaire Review

Licensing/Designations

Does the representative hold any professional designations? Review ACQ for consistency.

Is there evidence that the designations are still current?

Yes No Is the representative appropriately licensed in each state (insurance and securities) where his/her clients maintain

permanent residence. Run AC10 report for non-zero accounts and compare to state registration/licensing from the

Registration database.

Outside Business Activities

Yes No Are there any concerns with respect to Outside Business Activities either not being reported or other concerns? If

yes notate here:

_____________________________________________________________________________________

Yes No Does the representative understand the definition of selling away?

Yes No Does the representative understand the definition of discretion?

Transmittal of Customer Funds

Confirm that all representatives are familiar and comply with the following policies and written supervisory procedures.

Yes No RRs are not allowed to maintain funds or securities for customers in office overnight. RRs are allowed to scan to client

contact records the following: wire transfer instructions, ACH deposit, mail, journal instructions from another

account, checks-check receipts given.

Aware Not Aware Is the representative aware that firm policy prohibits the receipt of customer funds into a representative’s

account or related account and vice-versa?

Yes No Payout requests allowed only to the address and registration of record or third party payouts with notarized or signature

guaranteed LOA.

Yes No Familiar with information security best practices (as outlined in Compliance Memorandum 2008-10) to include device

integrity, usage of email, login practices, internet access, physical and technological security. Antivirus software

checked? Yes No

2. Office Support and Procedures

Yes No Does the representative have a broker dealer Signature Guarantee Stamp? (listed on outside business

activities).

Please describe who opens the mail and whether safeguards and training are in place to secure any checks or securities

received:__________________________________________________

Describe the representative’s process for handling client orders and receipt of checks when he/she is out of the

office:________________________________________________________________________________

Yes No Confirm that non-licensed personnel do not solicit or take orders as described in the duties of each associated person.

2 | P a g e

3. Sales Supervision

Books and Records

How does the Representative maintain customer account statements? Check all that apply

o Pershing statements maintained in dataVISION

o Direct Business statements maintained in dataVISION

o Direct Business statements maintained in hard copy at the branch

o Direct Business statements maintained via online access with provider

o Other ___________________________________________________________

How does the Representative review customer account activity? Check all that apply

o dataVISION Trade Blotter review

o Review of customer statements in dataVISION

o Review of customer statements via hard copy

o Log of review of online customer statements

o Review via periodic client account meetings/notes

o Other ___________________________________________________________

Correspondence/Advertising

Yes No N/A Is the representative using an appropriate telephone and voicemail greeting/message including disclosure of the

broker-dealer and trading instructions?

Yes No N/A Is the representative using an appropriate email disclosure including disclosure of the broker-dealer?

Did the internet search result in any discovery of the following not previously reported to registration:

Yes No N/A Is the representative using an approved website?

Yes No N/A Is the representative using any social networking websites?

Yes No Were any advertisements identified that were not submitted to Compliance?

Regulatory Audits

Yes No Has the representative been audited by any regulatory agency since the last Registered representative Audit? If yes,

obtain copies of all correspondence and attach to this audi

Books and Records

How does the Representative maintain evidence of the following for Advisory Business?

Review of customer activity and allocation?

o History notes in dataVISION®

o Outside contact management software – List here:_________________________________

Frequency?

o Annually

o Quarterly

-Registered Representative has reviewed the Written Supervisory Procedures and understands how to document changes in

investment objectives after the initial investment?

o Yes, I have reviewed the WSPs and understand my responsibility.

o No, I have not reviewed.

4. Audit Notes

Each branch utilized by a registered representative is subject to a periodic physical inspection. Evidence of that review can be

located on the Branch Inspection Form.

A summary of this audit including any deficiencies and/or areas for improvement will be sent to the compliance department.

If any deficiencies and/or areas for improvement were noted a letter will be sent to the representative. The OSJ Manager (or

his/her delegate) will follow up on any deficiencies until all items have been corrected.

___________________________________________ __________________________

SIGNATURE OF EXAMINER DATE

___________________________________________ __________________________REGISTERED

REPRESENTATIVE DATE

3 | P a g e

Advisory Program Questionnaire

Briefly describe your advisory business.

_____________________________________________________________________________________

_____________________________________________________________________________________

_____________________________________________________________________________________

Do you utilize any third party money managers? If yes who?

SEI

Genworth

Envestnet

Do you perform any of the following for a fee?

401k/403b review: If yes where are the accounts

held?

Annuity fee based wrap accounts? If yes where?

Financial Planning: What software do you use?

Are you affiliated with any Registered Investment Advisor

besides either WFS?

Partnervest Advisory Services

Other

__________________________________________________

__________________

Do you have your own Registered Investment Advisor?

Yes/No

State or SEC? and list name here:

______________________________________________

Do you create performance reports? Yes/No

If Yes – what vendor(s) or accounting system(s) do you use?

Notes WFS ADV Part II offering for all accounts is mailed to members annually by the WFS Compliance Department.

The 36 Month mailing are also centralized and handled by the WFs Compliance Department. For direct accounts a letter is sent to the

member and for Pershing accounts a statement trailer is sent. The WFS Compliance Department handles the annual Privacy Policy

mailing.


Conflicts and Supervision of Associated Persons’ Outside Activities Thursday, November 9 3:00 p.m. – 4:00 p.m.

Resources FINRA Rules

FINRA Rule 3270. Outside Business Activities of Registered Persons

http://finra.complinet.com/en/display/display.html?rbid=2403&record_id=12945&element_id=9467&highlight=3270#r12945

FINRA Rule 3280. Private Securities Transactions of an Associated Person

http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=12012

FINRA Notices

FINRA Regulatory Notice 17-20, FINRA Requests Comment on the Effectiveness and Efficiency of Its Rules on Outside Business Activities and Private Securities Transactions (May 2017)

www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-17-20.pdf

FINRA Regulatory Notice 10-49, SEC Approves Consolidated FINRA Rules (October 2010)

www.finra.org/sites/default/files/NoticeDocument/p122270.pdf

Notice to Members 01-79, Selling Away and Outside Business Activities (December 2001)

www.complinet.com/file_store/pdf/rulebooks/nasd_0179.pdf

Notice to Members 96-33, NASD Clarifies Rules Governing RR/IAs (May 1996)

www.complinet.com/file_store/pdf/rulebooks/nasd_9633.pdf Additional FINRA Resources

FINRA Reviews Rules on Outside Business Activities and Private Securities Transactions

www.finra.org/newsroom/2017/finra-reviews-rules-outside-business-activities-and-private-securities-transactions



http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=12012

http://www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-17-20.pdf

http://www.finra.org/sites/default/files/NoticeDocument/p122270.pdf

http://www.complinet.com/file_store/pdf/rulebooks/nasd_0179.pdf

http://www.complinet.com/file_store/pdf/rulebooks/nasd_9633.pdf

http://www.finra.org/newsroom/2017/finra-reviews-rules-outside-business-activities-and-private-securities-transactions

http://www.finra.org/newsroom/2017/finra-reviews-rules-outside-business-activities-and-private-securities-transactions


Conflicts of Interest

www.finra.org/industry/conflicts-of-interest SEC Resources

Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt FINRA Rule 3280 (Private Securities Transactions of an Associated Person) in the Consolidated FINRA Rulebook. See SEC Release No. 34–75757 (August 25, 2015); File No. SR–FINRA– 2015–030

Webpage: www.finra.org/industry/rule-filings/sr-finra-2015-030 Text of Proposed Rule Change: www.finra.org/sites/default/files/rule_filing_file/SR-FINRA-2015-030.pdf Notice of Firing and Immediate Effectiveness: www.finra.org/sites/default/files/rule_filing_file/SR-FINRA-2015-030-nof-imm-eff.pdf

SEC Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, Relating to Outside Business Activities of Registered Persons. See SEC Release No. 34-62762 (August 23, 2010), 75 FR 53362 (August 31, 2010), File No. SR-FINRA-2009-042

Webpage: www.finra.org/file/approval-order-44

PDF: www.finra.org/sites/default/files/RuleFiling/p121995.pdf

Conflicts of Interest and Risk Governance – Speech on 10/22/2012 by Carlo V. di Florio, Director of OCIE, to the National Society of Compliance Professionals

www.sec.gov/news/speech/2012-spch103112cvdhtm

http://www.finra.org/industry/conflicts-of-interest

http://www.finra.org/industry/rule-filings/sr-finra-2015-030

http://www.finra.org/sites/default/files/rule_filing_file/SR-FINRA-2015-030.pdf

http://www.finra.org/sites/default/files/rule_filing_file/SR-FINRA-2015-030.pdf

http://www.finra.org/sites/default/files/rule_filing_file/SR-FINRA-2015-030-nof-imm-eff.pdf

http://www.finra.org/file/approval-order-44

http://www.finra.org/sites/default/files/RuleFiling/p121995.pdf

https://www.sec.gov/news/speech/2012-spch103112cvdhtm

Documents

Conflicts and Supervision of Associated Persons’ Outside ...Conflicts and Supervision of Associated Persons’ Outside Activities Thursday, November 9 3:00 p.m. – 4:00 p.m. Outside