CompliancE-News™ Published by The Consortium® June 29, 2012 – page 1

The Executive Summary of All The News That Made The News June 29, 2012

INDUSTRY CONFERENCES (Contact sponsor for meeting information) Jul 10: RIA Policies and Procedures IA Watch National Webinar Nancy speaks webinar Sep 9-11: Fall Conference – Securities (BD, RIA) NASAA San Diego, CA NASAA events Sep 10-12: West Coast Meeting NAPFA Portland, OR www.napfa.org Sep 24: IA Compliance IA Watch Philadelphia, PA Nancy speaks seminar Oct 10-12: Advocacy Summit FSI DC watch for details Oct 22-24: National Conference NSCP DC www.nscp.org (watch for details / Nancy speaks) Nov 6-9: East Coast Meeting NAPFA Baltimore www.napfa.org

Nancy Speaks at IA Compliance Fall Conference Discount Provided

IA Watch has an amazing line-up of speakers and topics at the September Philadelphia conference. I will be speaking on “Due Diligence and Disclosure” to cover Form ADV, marketing materials, and other documents. I have arranged a discount for you. Enter code IAFALL12 on the registration form. See details: IA Compliance

GENERAL JOBS Act Begets Internet Fraud In anticipation of an increase in online fraud stemming in part from the JOBS Act, NASAA has created a new task force to focus on Internet fraud investigations. The Internet Fraud Investigations Project Group will monitor crowdfunding and other Internet offerings. Tasks include coordinating multi-jurisdictional efforts to scan online offering platforms for fraud and coordinating investigations into online or crowdfunded capital formation fraud. NASAA Insight Spring/Summer 2012 Senior Financial Exploitation The Dodd-Frank Act requires the Consumer Financial Protection Bureau (“CFPB”) to facilitate the financial literacy of individuals aged 62 or older (“seniors”), on protection from unfair, deceptive, and abusive practices and on current and future financial choices, including through dissemination of materials on such topics. In furtherance of this mandate, the CFPB’s Office for the Financial Protection of Older Americans (“Office for Older Americans”) seeks information on consumer financial products and services, financial literacy efforts, and fraudulent or deceptive practices impacting the lives of older Americans and their families. The Office for Older Americans will monitor certifications or designations of financial advisors who serve seniors and alert the SEC and state regulators of certifications or designations that are identified as unfair, deceptive or [Continued next page.]

CompliancE-News™ Published by The Consortium® June 29, 2012 – page 2

abusive. The Office for Older Americans will also make recommendations to Congress on best practices for disseminating information to seniors regarding the legitimacy of certifications and designations, and methods through which a senior can identify the financial advisor most appropriate for the senior’s needs. The Office for Older Americans is also conducting research to identify best practices for educating seniors on personal finance management. The Office intends to use this research to develop goals for programs that provide financial literacy and counseling to seniors. Comment Due Date: August 20, 2012. Federal Register 6/19/12 Trade Groups Tell Consumer Financial Protection Bureau That Arbitration Clauses Work Lobby groups for the banking industry have written to the Consumer Financial Protection Bureau to support the use of arbitration clauses in consumer disputes, despite complaints by consumer advocates. The letter was signed by the American Bankers Association, Consumers Bankers Association and Financial Services Roundtable. In a letter sent to the CFPB, the groups said arbitration clauses offer consumers a more cost-effective solution than individual or class action lawsuits. "The associations firmly believe that arbitration offers consumers and covered persons greater benefits than either individual or class action litigation, and that those benefits -- which include streamlined proceedings, informality, reduced cost and speed as well as ease of access -- have never been more important than they are in today's economy," the letter said. The CFPB announced in April that it was seeking public comments on the effectiveness of arbitration agreements in resolving consumer disputes with credit cards and other financial services. The Dodd-Frank law requires the CFPB to provide a report on its study to Congress and to determine whether the clauses protect consumers. Depending on the results of the study, the CFPB would have the authority to ban or limit the use of arbitration clauses. Emmanuel Olaoye, Thomson Reuters Accelus 6/26/12

REGULATORY AFFAIRS Investment Adviser Oversight Flies Under the Radar A hearing was held on June 6 on the Investment Adviser Oversight Act. Under discussion was the self-regulatory organization (“SRO”) concept. When the House Financial Services Committee published its calendar for June, the bill was nowhere to be found. The bill is not dead, but could be put off until after the elections. House Financial Services Committee Release 6/6/12 and Bachus Announces Committee Schedule 6/8/12 SEC Funding Increase: Now You See It – Now You Don’t I am extremely concerned about the level of funding at the Securities and Exchange Commission. Although the SEC receives a $50 million increase from last year, this increase is essentially offset by restrictions placed on the SEC Reserve Fund. Moreover, this level of funding is nearly 200 million dollars below the Administration's request. America's investors need a strong cop on the beat to ensure that past abuses are not repeated, and to ensure that the SEC's new powers under Dodd-Frank are vigorously enforced. The funding level in this bill is inadequate given these needs. Democrat Committee on Appropriations, Rep. José Serrano 6/20/12 SEC Staffs Up on PhD Economists to Focus on Cost-Benefit Analysis The SEC enhanced its economic firepower through significantly increasing the number of PhD economists in the Division of Risk, Strategy, and Financial Innovation. Lately much of the external focus on the role of economic analysis at the SEC has been on cost-benefit analysis – which is certainly an important part of economic analysis. However, it is not the only way that the SEC is using economic analysis in our work. Increasingly, our economists are getting involved earlier and more comprehensively in the rulemaking process, not just to help the SEC weigh the ultimate costs and benefits of our regulatory decisions, but to provide a reasoned framework for making those decisions. Examples include providing up-to-date information about the current state of the markets, and helping us think of alternative ways to meet our regulatory goals. Speech, SEC Commissioner Elisse Walter 6/8/12

CompliancE-News™ Published by The Consortium® June 29, 2012 – page 3

GAO Recommends Ways for SEC to Improve Oversight of FINRA In light of recent events in the financial markets, SEC and FINRA have faced questions about their oversight roles. The Dodd-Frank Act required the Government Accountability Office to study SEC’s oversight of national securities associations. This report examines (1) how SEC has conducted oversight of FINRA, including FINRA rule proposals and the effectiveness of its rules, and (2) how SEC plans to enhance its oversight of FINRA. Historically, the SEC oversight of FINRA programs and operations varied, with some programs and operations receiving regular oversight and others receiving limited or no oversight. SEC regularly reviewed FINRA proposed rule changes that are subject to SEC approval. However, neither SEC nor FINRA conducts retrospective reviews of FINRA’s rules. By not conducting these reviews, FINRA may be missing an opportunity to systematically assess whether its rules are achieving their intended purpose and take appropriate action, such as maintaining rules that are effective and modifying or repealing rules that are ineffective or burdensome. SEC has conducted limited or no oversight of other aspects of FINRA’s operations, such as governance and executive compensation. SEC should encourage FINRA to conduct retrospective reviews of its rules and establish a process for examining FINRA’s reviews. GAO Highlights 12-625 SEC Division of Risk, Strategy, and Financial Innovation Provides Guidance to SEC in Rulemaking High-quality economic analysis is an essential part of SEC rulemaking. It ensures that decisions to propose and adopt rules are informed by the best available information about a rule’s likely economic consequences, and allows the SEC to meaningfully compare the proposed action with reasonable alternatives, including the alternative of not adopting a rule. Recent court decisions, reports of the U.S. Government Accountability Office (“GAO”) and the SEC’s Office of Inspector General (“OIG”), and Congressional inquiries have raised questions about and/or recommended improvements to various components of the SEC’s economic analysis in its rulemaking, including: (1) identifying the need for the rulemaking and explaining how the proposed rule will meet that need; (2) articulating the appropriate economic baseline against which to measure the proposed rule’s likely economic impact (in terms of potential benefits and costs, including effects on efficiency, competition, and capital formation in the market(s) the rule would affect); (3) identifying and evaluating reasonable alternatives to the proposed regulatory approach; and (4) assessing the potential economic impact of the proposed rule and reasonable alternatives by seeking and considering the best available evidence of the likely quantitative and qualitative costs and benefits of each. OIG Report No. 499, comments on proposed rulemakings, and communications from Members of Congress have also included suggestions for improving the process by which economic analyses are developed and incorporated into SEC rulemaking, including earlier and more substantial involvement of SEC economists and more effective integration of economic analyses into rulemaking releases. The Division of Risk, Strategy, and Financial Innovation (“RSFI”) and the Office of the General Counsel (“OGC”) are providing guidance on economic analysis for SEC rules. This guidance – while broadly outlining best practices – is intended to allow for flexibility in the context of any particular rulemaking. The rule writing division or office, RSFI, and OGC should work closely to determine the appropriate approach for each rulemaking. Guidance on Economic Analysis in SEC Rulemaking 3/16/12

CompliancE-News™ Published by The Consortium® June 29, 2012 – page 4

TREASURY / FINCEN / ANTI-MONEY LAUNDERING (“AML”) All defined financial institutions must establish AML programs. The definition of financial institution includes: broker/dealers; investment companies; insurance companies; banks; savings associations; credit unions; money services; trust companies; private bankers; investment bankers; futures SEC merchants; commodity pool operators and commodity trading advisors; and dealers in precious metals. FinCEN has specifically excluded Investment Advisers from AML rules. --WATCH FOR LAW UPDATES FOR RIAs-- Money Management Business May be a Money Services Business (Subject to FinCEN Regulations) The Financial Crimes Enforcement Network (“FinCEN”) responds to an inquiry letter of December 14, 2011, seeking an administrative ruling from FinCEN on whether [ ] (the “Company”) is a money services business (“MSB”) under FinCEN’s regulations implementing the Bank Secrecy Act (“BSA”). Specifically, you ask whether the daily money management services the Company offers to its customers makes the Company a money transmitter under FinCEN’s regulations. FinCEN has determined that the Company is indeed a money transmitter for purposes of the BSA. In your letter, you represent that the Company facilitates the payment of monthly expenses for its customers and manages their day-to-day finances. The Company conducts a face-to-face consultation with the customer, in which the Company determines what expenses are to be paid each month – such as mortgage, rent, utilities, car payments, etc. – and their due dates, and assesses the amount of money the customer will need for other basic living expenses. The customer deposits money into the Company’s account (in the form of a personal check, a payroll check, or cash), and the Company pays the customer’s expenses by company check at their due date. FinCEN defines “money transmitter” to include a person that provides money transmission services, or any other person engaged in the transfer of funds. “Money transmission services” means the acceptance of currency, funds, or other value that substitutes for currency from one person AND the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means. The regulations also stipulate that whether a person is a money transmitter is a matter of facts and circumstances, and enumerates business models where a person’s activities would not make such person a money transmitter. FinCEN Ruling 2012-R004

STATE NEWS: INVESTMENT ADVISOR and BROKER/DEALER FIRMS While the positions and laws described herein relate to specific states, information is valuable to all investment professionals. States may adopt positions and laws already in effect with the SEC and/or other states, or new positions/laws may be an indication of changes in other jurisdictions. Florida: Reduces Fingerprint Card Processing Fee The fingerprint card processing fee for associated person applicants was reduced to $40.50, from $43.25, for applications received on or after May 29, 2012. CCH Blue Sky Law Reporter 6/16/12 www.cch.com Kansas: Waives Surety Bond Requirements for RIAs Investment advisers having custody of, or discretionary authority over, their clients’ funds or securities are no longer required to maintain a surety bond. The minimum $35,000 surety bond requirement was waived by order of the Kansas Securities Commissioner. CCH Blue Sky Law Reporter 6/16/12 www.cch.com Kentucky: Adds Inspection Fees for RIAs with AUM Exceeding $20 Million Fees paid to the KY Department of Financial Institutions’ to examine RIAs with AUM above $20 million were adopted to cover the higher threshold advisers subject to state rather than federal regulation in light of Dodd-Frank. RIAs with AUM of between $20 and $30 million pay $350; AUM between $30 and $45 million pay $450; AUM between $45 and $60 million pay $550; AUM between $60 and $75 million pay $650; and AUM exceeding $75 million pay $750. The fee for examining BDs and firms employing issuer-agents is $35 per working hour up to a total maximum fee of $1,000. CCH Blue Sky Law Reporter 6/16/12 www.cch.com

CompliancE-News™ Published by The Consortium® June 29, 2012 – page 5

COMPLIANCE for RIAs and BDs Nuances of Being Compliant – An Advisor Shares Lessons Learned from a Branch Audit I have a bit of an obsession about procedures, systematizing my office, and being compliant. So you can imagine how I felt during the days leading up my annual branch audit. As it turns out, my audit became an embraced visit that raised a number of critical issues and a few gentle reminders, giving us an opportunity to grow as a firm and become even stronger, and obviously, more compliant. Outside Business Activity: I took a position on a capital campaign steering committee at my daughter's school, and I neglected to disclose the activity because I did not have any check-writing privileges or a vote in how the committee handled finances. The examiner knew about the committee from a Google search, and addressed it with us. You would be surprised to find out the information that is available about you on the Internet. Social Media: We recently started using Facebook and LinkedIn for our firm. FINRA rules on social media are a bit of a gray and developing area, but our broker-dealer requires that our Facebook and LinkedIn profiles be linked to a tracking program so that all of our posts and interactions are tracked, recorded, and monitored (similar to the industry-wide requirements with email). We were compliant with these requirements. However, both of my licensed assistants had LinkedIn pages that were not. Though their profiles did not represent them to the public as financial advisors or mention our broker-dealer affiliation, they did have "Works at Taylor Financial Group" under their work history. Client Gifts: The $100 total gift allotment per client per year is quite low, especially if you are intent on providing a high-touch experience to your high-net-worth clients. We send our clients a cake for their birthday, wine at the holidays, chocolates for their anniversary, and a beach towel or throw blanket when they send us a referral. We have done a great job of managing our purchases (for example, purchasing in bulk) to not only reduce our costs but to stay under the (what we thought to be) $200 per household limit. Well, think again. That $100 limit is not per client; it is per household (excluding shipping). Obviously, the audit has required us to reevaluate our client service matrix and to scale back certain gifts to get compliant. State Registrations: I always have my assistants licensed so that they could accept and place orders for clients and discuss their accounts with them. Well, time to take it one step further. Not only must your assistants be licensed to accept orders from and talk to your clients about their accounts, but they must be registered in the states in which those clients reside if they are to perform those tasks. It may cost a few dollars in fees now, but if it protects you from liability later, it is worth every penny. Encryption: I travel with my iPad and use it when working from home (nights and weekends). We have been struggling with a little snafu as my iPad replies to my business emails using my personal email address for some reason. While we waited for an answer from Apple's Tech Support team on this item, I was conscious to always blind-carbon-copy my business email address so that there was a record of the email and it was tracked. I thought I was going a step beyond to be compliant, and instead I shot myself in the foot. Because I had blind-carbon-copied myself on these emails (rather than just fixing the problem and moving on), my compliance department knew of the problem, too, and they fined me. Ensure that your mobile devices are encrypted (if they have access to client's information), and make sure that the email accounts on the devices are properly set up, and use only your BD-approved email address when emailing clients and business associates. What we got right: Although there were a number of items we needed to address, we actually did a few things correctly. We send meeting notes with a summary of account performance and allocation, as well as a detailed recap of all things discussed at our client meetings to all clients within one week of the meeting. The auditor loved the meeting notes, as it showed a written log of all discussion with clients as well as changes made in their portfolios. Debra Taylor, CPA/PFS, Esq., Taylor Financial Group, as appearing in horsesmouth.com 6/18/12

CompliancE-News™ Published by The Consortium® June 29, 2012 – page 6

Investment Policy Statement (“IPS”)

As a Registered Investment Advisor you have an investment philosophy. It may be "buy and hold," quarterly asset reallocation, aggressive market timing, or other methodology. Your Form ADV provides the client with full disclosure about you, your services, and fees. Despite your best professional advice, you are still obligated to manage your clients portfolios based on their individual needs. As a fiduciary, an advisor must invest in the best interest of its clients. Each client's account must be managed on the basis of the client's financial situation and investment objectives, and in accordance with any reasonable restrictions imposed by the client on the management of the account. The purpose of an IPS is to allow your clients to state expectations and limitation on the management of their portfolio. The IPS is delivered electronically in WORD for your easy customization. Now availableNow availableNow availableNow available as a stand-alone document here: www.liftburden.com/prod-IPS.html The IPS is also available in the RIA Forms and Research Library here: www.liftburden.com/prod-RIA-forms.html Founder of Equity Research Firm Charged with Insider Trading The SEC charged Tai Nguyen, the owner of the California-based equity research firm Insight Research, with insider trading. The charges stem from the SEC’s ongoing investigation of insider trading involving so-called “expert networks” that provide specialized information to investment firms. The SEC alleges that Nguyen frequently traded in the securities of Abaxis, Inc. based on inside information he received from a relative employed at Abaxis. Nguyen repeatedly traded for himself in advance of the company’s quarterly earnings announcements while in possession of key data in those announcements, reaping tens of thousands of dollars in illicit profits. Nguyen also passed that same information to hedge fund clients of Insight Research, who used the inside information to make millions of dollars in profits from trading Abaxis securities. “Nguyen claimed expertise in researching and analyzing technology companies, but his special edge was his willingness to break the law,” said Sanjay Wadhwa, SEC Associate Director New York Regional Office and Deputy Chief of the Market Abuse Unit. “Like many other so-called ‘experts’ who trafficked in inside information, Nguyen now finds himself the subject of an enforcement action.” SEC Press Release 6/26/12 Trading Strategy Based on Gravitational Forces and Astrology Was a Fraud The SEC charged that a former broker in Orlando, Fla., defrauded investors in an astrology-based Ponzi scheme. The SEC alleges that Gurudeo “Buddy” Persaud lured family, friends, and others into investing in his firm, White Elephant Trading Company LLC, by falsely guaranteeing their money would be safe and yield lofty returns ranging from 6 – 18%. Persaud told investors he would invest in the debt, stock, futures, and real estate markets, but did not reveal that his trading strategy was based on his belief that markets are affected by gravitational forces. [Continued next page.]

CompliancE-News™ Published by The Consortium® June 29, 2012 – page 7

Persaud used investors’ money to make payments to other investors, the hallmark of a Ponzi scheme. Persaud also lost $400,000 of investor funds through his trading and diverted at least $415,000 to pay for his personal expenses. The same month Persaud began receiving investor money, he started using some of that money for his personal expenses. The SEC said that Persaud created phony account statements to hide his trading losses and give investors a false sense of security. The SEC alleges that in making trading decisions, Persaud chiefly relied on an Internet service that provided directional market forecasts based on lunar cycles and gravitational pull. Persaud’s strategy was premised on the idea that gravitational forces affect mass human behavior, and in turn, the stock market. For example, Persaud believed that when the moon exerts greater gravitational pull on the Earth, people feel dejected and are more inclined to sell securities. SEC Press Release 6/21/12

REGISTERED INVESTMENT ADVISORS (“RIAs”) Switching Off the Non-Switchers Dismiss any worries that the SEC will immediately cut you loose if you did not properly switch from federal to state registration as may be applicable. That process will take time. The SEC will begin in July to take "a hard look" at which firms shouldn't be federally regulated. The first pass will wave over those firms that neglected to file a Form ADV update in 2012. Next, it will scrutinize those firms clearly not over the asset threshold. The agency won't accept excuses that the firm is continuing to work on its state application (although tardiness by the state can be accepted). Even this won't trigger a sudden deregistration. The agency will mail a formal letter to the spotlighted firms. Next comes a Federal Register notice listing those firms that the agency intends to deregister. This stage permits any targeted firm to request a hearing to challenge the decision. The next step is deregistration. The agency's goal is to have every firm that no longer qualifies for SEC registration out by the end of the year. IA Watch 6/25/12 www.iawatch.com Section 13(f) Securities List – Second Quarter 2012 The list of “Section 13(f) securities” is made available for use in the preparation of reports filed with the SEC under Section 13(f) of the Securities Exchange Act of 1934. An updated list is published on a quarterly basis. This list is current as of June 15, 2012, and may be relied on by institutional investment managers filing Form 13F reports for the calendar quarter ending June 30, 2012. www.sec.gov/divisions/investment/13f/13flist2012q2.pdf Political Contributions by IAs: Ban on Third-Party Solicitation – Extension of Compliance Date The SEC is extending the date by which advisers must comply with the ban on third-party solicitation in rule 206(4)–5 under the Investment Advisers Act of 1940, the “pay to play” rule. The SEC is extending the compliance date in order to ensure an orderly transition for advisers and third-party solicitors as well as to provide additional time for them to adjust compliance policies and procedures after the transition. The effective date for this release is June 11, 2012. The effective date for the ban on third-party solicitation under rule 206(4)–5 of the Investment Advisers Act of 1940 remains September 13, 2010. The compliance date for the ban on third-party solicitation is extended until nine months after the compliance date of a final rule adopted by the SEC by which municipal advisor firms must register under the Securities Exchange Act of 1934. Once such final rule is adopted, we will issue the new compliance date for the ban on third-party solicitation in a notice in the Federal Register. Federal Register 6/13/12

CompliancE-News™ Published by The Consortium® June 29, 2012 – page 8

RIA Statistics – Before and After Dodd-Frank March 30, 2012 was the compliance date for several provisions of the Dodd-Frank Act that amended the registration provisions of the Advisers Act. Private Fund Advisers: There are approximately 3,990 IAs that manage one or more private funds registered with the SEC, of which 34% (1,369) registered since the effective date of the Dodd-Frank Act (July 21, 2011).

Private Fund Advisers

Population of Registered Advisers: There are 12,623 advisers registered with the SEC with total assets under management of $48.8 trillion. Based on data recently submitted by advisers, the staff expects 2,400 mid-sized advisers will switch to state registration by June 28, 2012, resulting in approximately 10,000 advisers with $48.6 trillion in AUM registered with the SEC. Using these projections, the staff anticipates that the cumulative impact of the Dodd-Frank Act registration changes will be a 25% decrease in the number of advisers registered with the SEC, but a 12% increase in the total AUM of those registered advisers.

Dodd-Frank IA Registration Requirements Preliminary Results 6/12/12

BROKER/DEALERS (“BDs”) and REGISTERED REPRESENTATIVES (“RRs”) New FINRA Rules – Communications with the Public The SEC approved FINRA’s proposed rule change to adopt NASD Rules 2210 and 2211 and NASD Interpretive Materials 2210-1 and 2210-3 through 2210-8 as FINRA Rules 2210 and 2212 through 2216 (collectively, the Communications Rules), and to delete certain provisions of Incorporated NYSE Rule 472 and certain Supplementary Material and Rule Interpretations related to NYSE Rule 472. The Communications Rules become effective on February 4, 2013. [Continued next page.]

CompliancE-News™ Published by The Consortium® June 29, 2012 – page 9

Reorganization of Rules: New FINRA Rule 2210 encompasses, subject to certain changes, the provisions of current NASD Rules 2210 and 2211, NASD Interpretive Materials 2210-1 and 2210-4, and the provisions of Incorporated NYSE Rule 472 that do not pertain to research analysts and research reports. Each of the other Interpretive Materials that follow NASD Rule 2210, except IM-2210-2 (Communications with the Public About Variable Life Insurance and Variable Annuities), have been assigned separate FINRA rule numbers and adopt the same communication categories used in FINRA Rule 2210. FINRA Rule 2210 – Communication Categories: The rule change reduces the number of current communication categories from six to three, as follows:

• Institutional communication includes written (including electronic) communications that are distributed or made available only to institutional investors, but does not include a firm’s internal communications. “Institutional investor” generally has the same definition as under NASD Rule 2211(a)(3).

• Retail communication includes any written (including electronic) communication that is distributed or made available to more than 25 retail investors within any 30 calendar-day period. “Retail investor” includes any person other than an institutional investor, regardless of whether the person has an account with the firm.

• Correspondence includes any written (including electronic) communication that is distributed or made available to 25 or fewer retail investors within any 30 calendar-day period.

FINRA Rule 2212 – Investment Company Rankings in Retail Communications: FINRA Rule 2212 replaces NASD IM-2210-3 with regard to standards applicable to the use of investment company rankings in communications. The standards generally remain the same. FINRA has revised the standards applicable to investment company rankings for more than one class of an investment company with the same portfolio. Such rankings also must be accompanied by prominent disclosure of the fact that the investment companies or classes have different expense structures. FINRA Rule 2212 adds a new paragraph (h) that excludes from the rule’s coverage reprints or excerpts of articles or reports that are excluded from filing requirements pursuant to FINRA Rule 2210(c)(7)(I). FINRA Rule 2213 – Requirements for the Use of Bond Mutual Fund Volatility Ratings: FINRA Rule 2213 replaces NASD IM-2210-5 with regard to standards applicable to the use of bond mutual fund volatility ratings in communications. The standards remain the same as in NASD IM-2210-5. FINRA Rule 2214 – Requirements for the Use of Investment Analysis Tools: FINRA Rule 2214 replaces NASD IM-2210-6 with regard to standards applicable to the use of investment analysis tools. The standards generally remain the same with some minor changes. FINRA Rule 2215 – Guidelines for Communications With the Public Regarding Security Futures: FINRA Rule 2215 replaces NASD IM-2210-7 with regard to standards applicable to communications concerning security futures. FINRA Rule 2215 would revise the current standards in several respects. FINRA Rule 2216 – Communications With the Public About Collateralized Mortgage Obligations: FINRA Rule 2216 replaces NASD IM-2210-8 with regard to standards applicable to retail communications concerning collateralized mortgage obligations. The standards remain the same as in NASD IM-2210-8. RN 12-29 FINRA Rule Precludes Collective Action Claims from Being Arbitrated The SEC approved amendments to FINRA Rule 13204 of the Code of Arbitration Procedure for Industry Disputes (Industry Code) to preclude collective action claims by employees of FINRA member firms under the Fair Labor Standards Act (FLSA), the Age Discrimination in Employment Act (ADEA) or the Equal Pay Act of 1963 (EPA) from being arbitrated under the Industry Code. The amendments are effective on July 9, 2012, for any claims that are part of a certified or putative collective action under the FLSA, ADEA or EPA. RN 12-28

CompliancE-News™ Published by The Consortium® June 29, 2012 – page 10

SEC Raises the Limit for Simplified Arbitration from $25,000 to $50,000 FINRA Rules 12800 and 13800 (Simplified Arbitration) of the Customer and Industry Codes of Arbitration Procedure provide streamlined arbitration procedures for claimants seeking damages of $25,000 or less. The SEC approved amendments to raise the dollar limit for simplified arbitration from $25,000 to $50,000. The amendments are effective on July 23, 2012, for all cases filed on or after the effective date. RN 12-30 Corporate Financing Rule 5110: Proposal Regarding Deferred Compensation in Public Offerings FINRA is requesting comments on proposed amendments to FINRA Rule 5110 (Corporate Financing Rule) that address current deferred compensation arrangements for financial advisory services in connection with public offerings, eliminate an anomalous filing requirement for exchange traded funds structured as statutory or grantor trusts, and make ministerial amendments to, among other things, reflect electronic filing requirements. RN 12-27 Approval FINRA Rule 5123: Private Placements of Securities in FINRA Consolidated Rulebook On October 5, 2011, FINRA filed with the SEC a proposed rule change to adopt FINRA Rule 5123 (“Private Placements of Securities”), which was published for comment in the Federal Register on October 24, 2011. The SEC received sixteen (16) comment letters in response to the original proposed rule change. On January 19, 2012, FINRA filed Amendment No. 1 to the proposed rule change and a letter responding to comments. In order to solicit additional input from interested parties on the issues presented in FINRA’s proposed rule change, on January 20, 2012, the SEC published notice of Amendment No. 1 for comment and an order instituting proceedings to determine whether to approve or disapprove the proposed rule change, as modified by Amendment No. 1. The SEC received eleven (11) comment letters in response to the Notice and Proceedings Order. On March 12, 2012, FINRA filed Amendment No. 2 to the proposed rule change and a letter responding to comments. On March 22, 2012, FINRA filed Amendment No. 3 to the proposed rule change. In Amendment No. 2, as further clarified by Amendment No. 3, FINRA proposed eliminating the Original Proposal’s requirement for members to disclose to investors the anticipated use of offering proceeds, and the amount and type of offering expenses and offering compensation. Instead, FINRA proposed to limit members’ obligations under proposed Rule 5123 to filing any existing offering document (including any material amendment thereto) used in connection with a sale of the subject securities within 15 calendar days of the date of first sale, or to identify that no such document was used. The SEC is soliciting comment on Amendments No. 2 and No. 3 and to approve the proposed rule change, as modified by Amendments No. 1, No. 2, and No. 3, on an accelerated basis. Federal Register 6/13/12 Proposed FINRA Rule 5270: Front Running of Block Transactions in FINRA Consolidated Rulebook FINRA is proposing to adopt NASD Interpretive Material 2110–3 (Front Running Policy) as FINRA Rule 5270 with changes. Federal Register 6/6/12 Proposed FINRA Rule 4210: Margin Requirements FINRA is proposing to amend FINRA Rule 4210 (Margin Requirements) to: (1) Revise the definitions and margin treatment of option spread strategies; (2) clarify the maintenance margin requirement for non-margin eligible equity securities; (3) clarify the maintenance margin requirements for non-equity securities; (4) eliminate the current exemption from the free-riding prohibition for designated accounts; (5) conform the definition of “exempt account”; and (6) eliminate the requirement to stress test portfolio margin accounts in the aggregate. In addition, the proposed rule change would amend FINRA Rule 4210 to make non-substantive technical and stylistic changes. Federal Register 6/6/12 Proposed FINRA Rule Change for Handling of Stop and Stop Limit Orders FINRA is proposing to amend rules relating to the handling of stop and stop limit orders. Federal Register 6/6/12

CompliancE-News™ Published by The Consortium® June 29, 2012 – page 11

FINRA Amending NASD Rules to Adopt Form CMA (Change in Membership Application) On February 28, 2012 FINRA filed with the SEC a proposed rule change to amend NASD Rules 1012 (General Provisions) and 1017 (Application for Approval of Change in Ownership, Control, or Business Operations) and to adopt Form CMA, a new standardized electronic form. The Form must be used by members who apply for approval of a change in ownership, control, or business operations consistent with Rule 1017. The proposed rule change was published for comment in the Federal Register on March 8, 2012. The SEC received four comment letters on the proposed rule change. On May 8, 2012, FINRA filed Amendment No. 1 and a letter in response to comments. The SEC approved the rule change as modified by Amendment No 1. Federal Register 6/6/12 Fee Fi Fo Fum and More Fees By FINRA Advertising: The fee for the review of printed material and video or audio media will be $125 (up from $100) for the first 10 pages or the first 10 minutes. The surcharge for lengthier materials remains unchanged. The fee for expedited review will be $600 (up from $500) per item for the first 10 pages, and the fee for pages in excess of 10 will be $50 (up from $25) per page. Implementation date July 2, 2012. RN 12-32 and Federal Register 6/28/12 Corporate Financing: (1) Increase the rate from .01 percent to .015 percent of the offering amount; (2) increase the maximum fee from $75,500 to $225,500 for such filings; and (3) increase the fee from $75,500 to $225,500 for an offering of securities on an automatically effective Form S–3 or F–3 registration statement filed with the SEC and offered pursuant to Securities Act Rule 415 by a Well-Known Seasoned Issuer as defined in Securities Act Rule 405. Implementation date July 2, 2012. RN 12-32 and Federal Register 6/28/12 Central Registration Depository (“CRD”): The following CRD fees are effective January 2, 2013.

U4: The fee for each initial or transfer U4 is increasing from $85 to $100. The discount schedule for transferring registrations in connection with an acquisition is unchanged.

Disclosure Events: Increase the disclosure filing fee for Forms U4 and U5 from $95 to $110 and to establish a new disclosure filing fee for Form BD of $110.

System Processing Fee: Increase from $30 to $45 the annual system processing charge for each member’s registered individuals.

Fingerprint Fees: Increase the fingerprint processing fee for fingerprints submitted electronically from $13 to $15 and the fee for fingerprints submitted by hard copy fingerprint card from $13 to $30, thus establishing a two-tiered structure. These are the fees charged by FINRA, plus an additional fee is collected on behalf of the FBI.

Mass Transfer: Eliminate the exception to the payment of re-registration fees for successor members involved in a mass transfer. The elimination of the exception will result in all members that participate in FINRA’s Mass Transfer Program to be assessed fees for the re-registration of branch offices and personnel of the predecessor.

Late Disclosure: Increase the late disclosure fee to $100 for the first day that an applicable disclosure event is not timely filed and $25 for each subsequent day, up to a maximum of 60 days. This is up from $10 per day. The maximum amount of the late disclosure fee will increase from $300 to $1,575. RN 12-32 and Federal Register 6/29/12 Branch Office Annual Registration: Effective January 2, 2013, an annual registration fee of: (1) $175, for the first 250 branch offices registered by the member; (2) $150, for branch offices 251 to 500 registered by the member; (3) $125, for branch offices 501 to 1,000 registered by the member; (4) $100, for branch offices 1,001 to 2,000 registered by the member; and (5) $75, for every branch office greater than 2,000 registered by the member. The rule change retains the $20 annual branch office system processing fee per registered branch. FINRA will assess the fee based on the total number of branch offices registered at the end of each calendar year. The rule change continues to waive, for one branch office per member per year, payment of the annual registration fee (and the $20 annual branch office system processing fee), but increase the amount of the waiver from $75 to $175. RN 12-32 and Federal Register 6/28/12

CompliancE-News™ Published by The Consortium® June 29, 2012 – page 12

New Membership: Revise the new member application fee structure to implement a fee structure that would assess fees ranging from $7,500 to $55,000 depending on the size of the new member applicant, per table below. The revised fee structure also would assess an additional $5,000 surcharge for a new member applicant that intends to engage in any clearing and carrying activities.

Also the fee is increased from $350 to $500 for processing new member applications that are deemed not to be substantially complete. Implementation date July 23, 2012. RN 12-32 and Federal Register 6/28/12 Continuing Membership Application: FINRA does not currently charge a fee for submitting a continuing membership application. A tiered structure published in RN 12-32 will result in fees ranging from $5,000 - $100,000. A new $500 processing fee will be charged for CMAs that are deemed not to be substantially complete. Implementation date July 23, 2012. RN 12-32 and Federal Register 6/28/12 Trading Activity Fee (“TAF”) for Sales of Covered Equity Securities: Effective July 1, 2012, the TAF rate for sales of covered equity securities will increase from $0.000095 per share for each sale of a covered equity security to $0.000119 per share, with a corresponding increase to the per-transaction cap for covered equity securities from $4.75 to $5.95. The new rate applies to any sale of a covered equity security subject to the TAF occurring on or after July 1, 2012. RN 12-31 and Federal Register 6/28/12

ERISA Tally on Fiduciary Status Speaking to a June 18 conference of retirement plan managers in Washington, Ms. Borzi said that the Labor Department and the SEC will continue to pursue separate fiduciary-duty rules because they are governed by different statutes. “I absolutely will not promise anybody there will be a single fiduciary standard, because that's impossible,” Ms. Borzi said. “Compliance with one of the standards won't put you out of compliance with the other standard. It doesn't mean a single standard; it does mean a compatible standard.” On June 20, Borzi wrote a letter to the US House of Representatives, Committee on Education and Workforce saying, “We agree that regulations from different agencies should not be contradictory or overly burdensome. To that end, the DOL has consulted extensively with the SEC and others.” She expressed her disappointment that in response to two DOL data requests that the data was limited. By June 25, Democratic lawmakers responded with an attack on the DOL for its cost-benefit approach (the data request being unrealistic in scope and timing) and for an alleged lack of adequate coordination with the SEC. Mark Schoeff, Investment News 6/27/12 and Suzanne Barlyn, Reuters 6/27/12 and DOL Letter 6/20/12 Looking Through the Brokerage Window Brokerage accounts offered through defined contribution plans do not change sponsors' fiduciary responsibility, said Phyllis Borzi, the Labor Department's top retirement official. “A plan fiduciary needs to prudently select and monitor a service provider. Once you choose a service provider, you can't just walk away,” Ms. Borzi, assistant secretary for the Employee Benefits Security Administration, told attendees at the SPARK Institute annual meeting in Washington. [Continued next page.]

CompliancE-News™ Published by The Consortium® June 29, 2012 – page 13

Industry criticized the DOL for a May 7 guidance document that discusses brokerage accounts and other elements of new rules affecting fee disclosure between sponsors and participants. They claim the document is breaking new regulatory ground that requires a formal review process. Ms. Borzi said the DOL addressed brokerage windows in plans after finding “a disturbing trend” among plan sponsors seeking to avoid ERISA responsibility by “just giving choices.” Hazel Bradford, Pension & Investments Online 6/18/12 www.pionline.com Brokerage Window Defined The ability to direct trading within a brokerage's offering through a retirement plan such as a 401(k). As opposed to being limited to the investment options within a sponsored 401(k), some investors have the option to set up a "window," which allows them to trade most listed stocks, mutual funds and exchange-traded funds. May also be known as a "self-directed account" or "self-directed brokerage account." It is a viable option for those who understand the increased risks of individual security selection and asset allocation. Investopedia

SECURITIES / MARKETS / ISSUERS Money Market Reform Money market funds are vulnerable to runs because shareholders have an incentive to redeem their shares before others do when there is a perception that the fund might suffer a loss. Several features of money market funds, their sponsors, and their investors contribute to this incentive. Misplaced Expectations: The stable $1.00 share price has fostered an expectation of safety, although money market funds are subject to credit, interest-rate and liquidity risk. Recurrent sponsor support has taught investors to look beyond disclosures that these investments are not guaranteed and can lose value. First Mover Advantages: Investors have an incentive to redeem at the first sign of problems in a money market fund. An early redeeming shareholder will receive $1.00 for each share redeemed even if the fund has experienced a loss and the market value of the shares will be worth less (e.g., $0.998). These redemptions at $1.00 per share concentrate losses in the remaining shareholders. Early redeemers tend to be institutional investors who can commit resources to watch their investments carefully and who have access to technology to redeem quickly. Mismatch of Assets and Liabilities: Money market funds offer shares that are redeemable upon demand, but invest in short-term securities that are less liquid. If all or many investors redeem at the same time, the fund will be forced to sell securities at fire sale prices, causing the fund to break a dollar, but also depressing prevailing market prices and thereby placing pressure on the ability of other funds to maintain a stable net asset value. Given the role money market funds play in providing short-term funding to companies in the short-term markets, a run presents not simply an investment risk to the fund’s shareholders, but significant systemic risk. No one can predict what will cause the next crisis, or what will cause the next money market fund to break the buck. But we all know unexpected events will happen in the future. The SEC is exploring a number of structural reform options.

1. Require money market funds, like all other mutual funds, to buy and sell their shares based on the market value of the funds’ assets. That is, to use “floating” net assets values.

2. Allow money market funds to maintain a stable value as they do today, but require the funds to maintain a capital buffer to support the funds’ stable values, possibly combined with limited restrictions or fees on redemptions. The capital buffer would not necessarily be big enough to absorb losses from all credit events. Instead, the buffer would absorb the relatively small mark-to-market losses that occur in a fund’s portfolio day to day, including when a fund is under stress.

3. Limits on redemptions could further enhance a money market fund’s resiliency and better prepare it to handle a credit event. Restrictions on redemptions could be in several forms designed to require redeeming shareholders to bear the cost of their redemptions when liquidity is tight.

Testimony, SEC Chairman Mary Schapiro 6/21/12

CompliancE-News™ Published by The Consortium® June 29, 2012 – page 14

Criticism on Schapiro’s Money Market Reform SEC Chairman Mary Schapiro faced skeptical lawmakers from both parties as she defended her campaign to overhaul the regulation of money-market funds. In an appearance before the Senate Banking Committee, Schapiro told lawmakers that while most funds are "well and responsibly managed," they are susceptible to the types of runs that helped freeze credit markets in 2008. Schapiro hasn't been able to convince a majority on her five-member commission to support a proposal to rewrite money-market rules and today's hearing demonstrated the difficult task she faces on Capitol Hill as well. "In my view, you're portraying an industry that's extremely vulnerable, that has all these risks of runs and I really find that extraordinary in light of the actual history," Senator Patrick Toomey, a Pennsylvania Republican, told Schapiro. "We've had another round of real stress: an ongoing recession, European credit crisis, downgrade of the U.S. government, considerable redemption pressure and not a single problem in this industry." Financial Advisor Magazine 6/21/12 www.fa-mag.com Extraordinary Volatility in Individual Stocks and Broader Stock Market The SEC approved two proposals submitted by the national securities exchanges and FINRA that are designed to address extraordinary volatility in individual securities and the broader U.S. stock market. One initiative establishes a “limit up-limit down” mechanism that prevents trades in individual exchange-listed stocks from occurring outside of a specified price band. This new mechanism will replace the existing single-stock circuit breakers that the SEC approved on a pilot basis after the market events of May 6, 2010. The second initiative updates existing market-wide circuit breakers that when triggered, halt trading in all exchange-listed securities throughout the U.S. markets. The existing market-wide circuit breakers were adopted in October 1988 and have been triggered only once, in 1997. The changes lower the percentage-decline threshold for triggering a market-wide trading halt and shorten the amount of time that trading is halted. The exchanges and FINRA will implement these changes by February 4, 2013. The SEC approved both proposals for a one-year pilot period, during which the exchanges, FINRA, and the SEC will assess their operation and consider whether any modifications are appropriate. SEC Press Release 6/1/12 What Are “Chills” and “Freezes” and Why Does the Depository Trust Company (“DTC”) Impose Them? Occasionally a problem may arise with a company or its securities on deposit at DTC. In some of those cases DTC may impose a “chill” or a “freeze” on all the company’s securities. A “chill” is a restriction placed by DTC on one or more of DTC’s services, such as limiting a DTC participant’s ability to make a deposit or withdrawal of the security at DTC. A chill may remain imposed on a security for just a few days or for an extended period of time depending upon the reasons for the chill and whether the issuer or transfer agent corrects the problem. A “freeze” is a discontinuation of all services at DTC. Freezes may last a few days or an extended period of time, depending on the reason for the freeze. If the reasons for the freeze cannot be rectified, then the security will generally be removed from DTC, and securities transactions in that security will no longer be eligible to be cleared at any registered clearing agency. DTC imposes chills and freezes on securities for various reasons. For example, DTC may impose a chill on a security because the issuer no longer has a transfer agent to facilitate the transfer of the security or the transfer agent is not complying with DTC rules in its interactions with DTC in transferring the security. Often this type of situation is resolved within a short period of time. Chills and freezes can be imposed on securities for more complicated reasons, such as when DTC determines that there may be a legal, regulatory, or operational problem with the issuance of the security, or the trading or clearing of transactions involving the security. SEC Investor Bulletin May 2012

CompliancE-News™ Published by The Consortium® June 29, 2012 – page 15

Phase-In of Derivatives Regulation – Security-Based Swaps The SEC is requesting public comment on a statement of general policy (“Statement”) on the anticipated sequencing of the compliance dates of final rules to be adopted by the SEC. These provisions establish a framework for the regulation of security-based swaps and security-based swap market participants under the Exchange Act. The Statement presents a sequencing of the compliance dates for these final rules by grouping the rules into five categories and describes the interconnectedness of the compliance dates for these rules, both within and among the five categories. The Statement also describes the timing of the expiration of the relief previously granted by the SEC that provided exemptions from certain provisions of the Exchange Act, the Securities Act of 1933, and the Trust Indenture Act of 1939. Comments regarding the Statement should be received by August 13, 2012. Federal Register 6/14/12 and SEC Press Release 6/11/12 Swap Data Recordkeeping and Reporting: Pre-Enactment and Transition Swaps The Commodity Futures Trading Commission (“CFTC”) is adopting rules to further implement the Commodity Exchange Act (“CEA”) with respect to the new statutory framework regarding swap data recordkeeping and reporting established by the Dodd-Frank Act. The Dodd- Frank Act, which amended the CEA, directs that rules adopted by the CFTC shall provide for the reporting of data relating to swaps entered into before the date of enactment of the Dodd-Frank Act, the terms of which have not expired as of the date of enactment of the Dodd-Frank Act (“pre-enactment swaps”) and data relating to swaps entered into on or after the date of enactment of the Dodd-Frank Act and prior to the compliance date specified in the CFTC’s final swap data reporting rules (“transition swaps”). These final rules establish swap data recordkeeping and reporting requirements for pre-enactment swaps and transition swaps. The effective date of this part is August 13, 2012. See Federal Register for compliance dates. Federal Register 6/12/12 Public Disclosure of Financial Incentives Paid or Received by Dealers and Municipal Advisors The Municipal Securities Rulemaking Board (“MSRB”) is requesting comment on a concept proposal relating to the potential public disclosure on the MSRB’s Electronic Municipal Market Access (“EMMA”®) system of certain payments and receipts by brokers, dealers, and municipal securities dealers (“dealers”) and municipal advisors in connection with their respective municipal securities activities and municipal advisory activities that could potentially represent conflicts of interest. This concept proposal is intended to elicit input from all interested parties on the potential benefits and burdens of establishing such a public conflicts disclosure regime, as well as on potential alternatives to achieving the purposes enunciated below, to assist the MSRB in determining whether to consider undertaking a rulemaking process to propose requirements for public disclosures as described herein. Submit comments by July 31, 2012. MSRB Notice 2012-28 Listing Standards for Compensation Committees and Compensation Advisers The SEC approved a rule that directs national securities exchanges to adopt listing standards for public company boards of directors and compensation advisers. The new rule, required by the Dodd-Frank Act, requires exchange listing standards to address:

• The independence of the members on a compensation committee • The committee’s authority to retain compensation advisers • The committee’s consideration of the independence of any compensation advisers and • The committee’s responsibility for the appointment, compensation, and oversight of the work of any

compensation adviser. Once an exchange’s new listing standards are in effect, a listed company must meet the standards in order for its shares to continue trading on that exchange. SEC Press Release 6/20/12 and Federal Register 6/27/12

CompliancE-News™ Published by The Consortium® June 29, 2012 – page 16

MARKETING and PRACTICE MANAGEMENT Consumer Focus Group Gives Insights to Advisors An array of middle-class consumers were brought on stage at the Loring Ward conference and given full license to blast the financial advisory profession. The obvious conclusion: There is tremendous work to be done to make advisors more professional. The people spent 90 minutes offering their candid insights on the three advisors making pitches for Loring Ward in a video. Each consumer was equipped with a handheld device, and as the advisor spoke they were told to rate the advisor’s performance on a scale of one to 100, in real time. Plain English, Please: Whenever advisors digressed into mumbo jumbo about comprehensive this or estate planning that, the needle dipped immediately. When advisors talked about themselves, it dipped. When they discussed company solutions, it dipped some more. If the advisor spoke about the consumer as a person and his or her needs, the rating went up. If they managed to avoid polysyllabic words, it went even higher. Guessing or Trusting: Aside from rating advisors based on video clips, members of the focus group talked about their own advisors. Virtually none were enthused. One common theme was that – in this volatile environment – the investors felt like their advisors were wishy-washy about what to do with cash. Brooke Southall, RIABiz 6/11/12 www.riabiz.com Fee Statistics Nearly 20 percent of advisers collect most or all of the plan fee up front when charging specifically for a financial plan. Another 25 percent bill half up front with the remainder invoiced after plan delivery (see Exhibit 1).

An overwhelming majority of planners (80 percent) spend between one and three hours in the initial client discovery meeting. This is true regardless of business model and years of experience, with all groups averaging about two hours. After the client discovery meeting and receipt of client data, 60 percent of advisers deliver the plan in one to less than three weeks. On average, they spend 11.5 hours developing the plan, with retirement planning and investment planning taking up nearly half of this time. Insurance, estate and cash management planning take another 27 percent of that time, on average. FPA Practice Management Center 6/1/12

CompliancE-News™ Published by The Consortium® June 29, 2012 – page 17

Pointers for an Inspiring Client Letter What qualities should a monthly client letter contain?

1. Accurately represent my thoughts 2. Appeal to the entire breadth of my client base 3. Educate but not preach 4. Foreshadow portfolio activity using a specific investment type as an example 5. Show a path, a connection between investment environment and actions, that points toward a potentially

positive outcome 6. Open up a view that will portray some uniqueness 7. Stay away from politics 8. Provide a new idea or a slant on an old idea that clients may not have thought about, allowing me to show

off just a little 9. Take a form that speaks to the way I approach my business 10. Get approval from my compliance officer 11. Keep to my pledge of sticking to one or two specific topics or themes (avoid wandering thoughts and

manufacturing noise that turns off readers) 12. Point out things that could happen, possibilities, without predicting (thanks for the thought, Freeman

Dyson) 13. End on a positive note

William Nicklin, www.horsesmouth.com To Brochure or Not to Brochure Few things seem to attract a financial advisor’s attention more than brochures. The reasoning is straightforward – advisors operate in a world of intangibles, so they need something tangible to showcase themselves, their practice/team, and what they deliver. The idea is that brochures are so professionally compelling that they make clients proud and entice prospects to join the advisor’s book. However, our latest Affluent Research project (surveying investors with $500,000 or more in investable assets) shows the reality. Today’s investors select their financial advisors based on the following:

• Strong recommendation from someone I trust: 31% • Reputation of the individual financial advisor: 22% • Reputation of the financial advisor’s firm: 17% • Proposal/recommendations were appealing: 14% • First impression of professionalism and competency: 13% • Other: 3% • Quality of promotional material (brochures): 0% • Quality of pitch book: 0%

Promotional materials have no influence. Period! Today’s affluent has spoken. Their trust in financial services is extremely fragile, and they aren’t going to allow some piece of promotion, no matter how professional-looking, to affect their decision. The affluent have seen impressive brochures and not-so-impressive service. Matt Oechsli, Wealth Management Magazine, June 2012 www.wealthmanagement.com Don’t Be So Fast to Toss Out the Brochure Concept Matt makes very good points in his article above. I like to offer a counterpoint. While a brochure has never “made” the sale, a lack of a brochure can lose the sale. I don’t think in any survey of the affluent (or even the not-so-affluent) that anyone would admit to choosing someone on the quality of a brochure. But a brochure is a factor for some of the people some of the time. [Continued next page.]

CompliancE-News™ Published by The Consortium® June 29, 2012 – page 18

Yes, you sell an intangible and the brochure is something tangible to hand to someone. Even as more people are relying on websites, social media, and other electronic gizmos as confirmation, there are some personality types that need to see it in writing (in hard print) to believe it. If a prospect is evaluating you and one of your competitors – if both financial advisors were based on a referral, and all other factors were somewhat balanced, I suspect the advisor that can place the textured document into someone’s hand will win the business. With so many advisors moving away from the print brochure, this can be the factor that differentiates you. In order of priorities... get your ADV “full disclosure brochure” done first, then your web presence, and then add the marketing brochure to your repertoire of materials. --Nancy Lininger, The Consortium

If you do Social Media... do you have a Social Media Policy?

Social media has crossed over into the business realm, creating compliance concerns. There are 3 main challenges to address: 1) advertising rules and standards of communications with the public; 2) supervision (approval and monitoring); and 3) recordkeeping. Do you have the most current E-Commerce policies in your in your Written Supervisory Procedures? Obtain the most current RIA Written Supervisory Procedures template covering all compliance topics: http://www.liftburden.com/prod-procedures-ethics.html

TIDBITS 8 Tips for Staying Positive

1. Look for at least two things that make you happy on your way to work each day. They could be as simple as a flowering plant that you pass along the way.

2. When you're stressed, take a moment and breathe deeply. Then let your breath out slowly.

3. Avoid the office gossips and people who complain all the time.

4. Make a list of all the aspects of your work that give you pleasure and a sense of purpose.

5. Take a short walk away from your work area at least twice a day. It's good exercise and gets your mind

off things that may be bringing you down.

6. Take baby steps as you attack your workload. You'll feel better about your job when you complete what you can.

7. Make your work area someplace you enjoy. Use colors you like, pictures and reminders of happy times.

8. Remember, life doesn't just happen. You can control how you react to everything that happens to and

around you. Marie Stempinski, Strategic Communication as appearing in Sir Speedy Basically Business May 2012

CompliancE-News™ Published by The Consortium® June 29, 2012 – page 19

Joke of the Month Why are pirates called pirates? Just because they aaaaaarrrrrhhhh! Headline of the Month City Unsure Why the Sewer Smells By Kristin Hay, South Haven News Quote of the Month on Social Networks A squirrel dying in front of your house may be more relevant to your interests right now than people dying in Africa.

Mark Zuckerberg

Nancy Lininger, Professional Weightlifter. Will lift the burden of compliance and marketing off your shoulders.

Your questions are my business – Research and information services available to retainer clients.

Selected questions of general interest may be submitted via e-mail for publication.

CompliancE-News™ PUBLISHED BY THE CONSORTIUM®

PO Box 2682, Camarillo, CA 93011-2682

(805) 987 – 6115 Fax (805) 987 – 1988 e-mail: Nancy@liftburden.com www.liftburden.com

Annual subscription CompliancE-News (12 monthly single-copy issues) $129 Add value with CompliancE-Alert (includes timely in-depth topic coverage, forms & E-News) $829

©2012 The Consortium®

Materials may not be distributed in electronic or print format in whole or part without written permission. The Consortium, CompliancE-News, Professional Weightlifter and

“Lift the burden of compliance and marketing off your shoulders” are all trademarks of The Consortium

Annual retainer clients may obtain copies of research sources cited in the E-News free of charge. Research services to locate information by topic matter are only available to annual retainer clients. Retainer fees are custom quoted based on various factors. Minimum annual retainer fee is $12,000.

All others may obtain copies of research by contacting sources directly. Note that many of these sources are free to you via public access to the Internet. Where available, the link has been provided.