SDDco Perspective Newsletter

December 13, 2019 | Vol 15. Edition 1

Dear SDDco Clients and Colleagues: Our SDDco Perspective includes industry news, guidance, regulatory rule updates, deadlines, and other timely matters impacting brokers, advisors, fintech firms, taxpayers, investors, and their service professionals. The SDDco Perspective is made available on our website monthly at http://sddco.com/resources-newsletter.

FINANCIAL INDUSTRY

Bryon Lyons
CEO, SDDco Brokerage Advisors, LLC

Bryon Lyons

Zero Commissions and the Schwab-Ameritrade Merger Signal Industry Consolidation

On November 25th, Charles Schwab announced its takeover of TD Ameritrade in an approximate $26 billion deal. It is an all stock transaction; whereby TD Ameritrade stockholders will receive Charles Schwab shares in return. The merger creates an online broker with more than $5.1 Trillion in assets, moving it up just behind the other behemoths Vanguard ($5.7T) and Fidelity ($7.8T).

With the decision to no longer charge commissions for many equity and ETF trades by retail customers and investment advisors, consolidation is a must in the online broker world. With 57% of Schwab’s income (and 28% of TD Ameritrade’s) coming from net-interest margin, increased scale (and the reduced costs in the combined firm) will continue to allow Schwab to grow significantly. That scale will make the firm attractive to other brokers and market makers, which pay for order flow; and will create more opportunity within the online broker and adviser for its options and robo-adviser services. The jury is still out as to whether such scale will continue to serve retail investors.

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FINTECH & CYBERSECURITY

Erin Furtado
Head of Marketing

Erin Furtado

Uber Has Entered the Financial Services Industry with Uber Money

As tech firms are entering the financial services industry, so is car service titan Uber. Even though their stock is plummeting, Uber Money will enable its driver and couriers to get paid through a digital wallet after every ride opposed to waiting for their weekly earnings. Uber is also partnering with Barclays and launching the Uber Credit Card offering cardholders a 5% rebate when using Uber Rides, Uber Eats, and JUMP bikes. Uber is really trying to make a name for themselves in the financial services industry and we expect more to come from them in the future. They will be an interesting company to watch in the market.

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Cyber-Risk Is a C-Suite Issue

Although the need for cybersecurity awareness is growing, many organizations are finding it difficult to maintain basic levels of security such as polices and incident response plans. Through a survey conducted by NTT Security’s 2019 Risk: Value Research we found that:

  • 28% of employees understand their firm’s cyber policies
  • 52% have an incident response plan in place
  • 15% of IT budget is directed at cybersecurity
  • 1/3 respondents would rather pay ransom than be fined for being noncompliant
  • 45% said cybersecurity is an IT department issue (most of which were C-Suite leaders themselves)

These findings are alarming, cyber should be a prime concern for C-Suite leaders. In the digital era, every C-suite decision will affect the organization's cyber-risk exposure. If cybersecurity isn’t built into your boardroom agenda on a regular basis, it should be. It is not an IT department issue; it is a C-suite issue. It starts from the top. Being resilient and practicing incident response and communication plans will only help your firm recover quickly. Make sure all employees understand your cyber policies, have response plans in place and set a healthy cyber budget to achieve true resilience.

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SDDco CYBER
COMPLIANCE & SUPPORT OFFERING

  • Become compliant with all state and federal requirements including FINRA, NYDFS, SEC, etc.
  • Infrastructure Testing including Penetration Testing
  • Customized and Tested Policies and Procedures
  • Fully Managed Incident Response Coverage
  • Data Security Training
  • Vendor Due Diligence
  • Risk Assessments

Cybersecurity graphic

Speak with an SDDco consultant about how we can help you navigate the nuances of armoring your firm through  SDDco Cyber.

COMPLIANCE & REGULATORY

Ross Marlin
Associate Director

Ross Marlin

Dual Registrant Failed to Convert Inactive Fee-Based Accounts to Traditional Brokerage Accounts

A large dual registrant agreed to pay over $15 Million in fines, disgorgement and penalties for failing to convert inactive fee-based advisory accounts into traditional brokerage accounts. The firm’s policies required its financial advisers to conduct ongoing suitability reviews and flag those accounts without significant trading activity during the prior 12 months. However, the Firm’s financial advisers failed to respond to requests from the Compliance Department to complete the reviews and, over a 5-year period, failed to properly review nearly 8,000 accounts. The SEC cited the firm for lacking specific escalation procedures for the failure to respond to compliance inquiries.

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To learn more about how SDDco can help strengthen your firm’s compliance program, click here.

HR COMPLIANCE

Elizabeth Drivas
Business Consultant

Elizabeth Drivas

Staying HR Compliant in NY State

Staying compliant as a business can be difficult. Below you can find a checklist of what forms are mandatory to retain and distribute to employees for New York according to federal, state and city laws.

  • I-9 Form (Filed Apart From Employees’ General Personnel Files)
  • W-4
  • NYS Notice and Acknowledgement of Pay Rate and Payday – (Exempt or Non-Exempt) (Employee Retains Copy, Employer Retains Original)
  • New York City’s Earned Safe and Sick Time Act Notice of Employee Rights (Employee Retains)
  • NYC Stop Sexual Harassment Act Fact Sheet / Information Sheet (Employee Retains)
  • NYS Paid Family Leave Statement of Rights Notice (Employee Retains)
  • NYC Pregnancy Fact Sheet
  • Initial COBRA Notification Letter (Employee Retains)
  • Health Exchange Notice – Employer Offers Health Insurance (Employee Retains)
  • Health Exchange Notice – Employer Does Not Offer Health Insurance (Employee Retains)
  • Commuter Benefit Compliance Form (Employers with 20 or more full-time* non-union employees)

Click here if you have any immediate questions about ensuring your business is compliant or reach out to our dedicated Paychex representative Elizabeth Drivas at (646) 228-5529.

SDDco SERVICE OF THE MONTH:

FINRA New Membership
Application (NMA) Services

Success hinges on understanding the client business, appropriate responses to FINRA information requests, and full membership interview preparedness. SDDco consultants are skilled in this meticulous process having represented firms of varied size and structure.

  • Developing your business plan
  • Preparing for your FINRA NMA filing
  • Drafting your policies & procedures
  • Managing your WEB NMA
  • Handling your FINRA requests
  • Assisting with your FINRA interview

Learn More by Downloading Our Broker-Dealer Membership & Compliance Services Brochure

DOWNLOAD >
Broker-Dealer Membership & Compliance Services Brochure

SDDco Group makes this general information available for educational purposes only, the contents of which were not originated from SDDco. SDDco is not affiliated with any of the publishing persons or entities of the articles herein. The information provided should not be construed as legal advice. This email may constitute an advertisement under U.S. law.

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