SDDco Perspective Newsletter

October 2020

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.

Suspicious Activity Reports Release Provides Revealing Detail of Years Long Worldwide Money Laundering Schemes

Bryon Lyons
CEO, Independent Brokerage Solutions LLC

Bryon Lyons

On September 1, 2020, the Financial Crimes Enforcement Network agency of the U.S. Department of the Treasury (“FinCEN”) issued a notice for immediate release stating it “is aware that various media outlets intend to publish a series of articles based on unlawfully disclosed Suspicious Activity Reports (“SARs”) as well as other sensitive government documents from several years ago.” Financial industry participants subject to the Bank Secrecy Act (“BSA”) anti-money laundering (“AML”) program obligation to report suspicious activity know that it is a federal crime to reveal the existence of any such report, let alone release it to the media. Hugh Griffiths, head of a U.N. Panel of Experts tracking North Korean illicit efforts observed that U.S. financial institutions are obligated to comply with the rules and to report suspicious activities to FinCEN, which connects the dots. Compliance departments are not designed to operate like law enforcement agencies.

The FinCEN Files, a collaborative project between and among the International Consortium of Investigative Journalists and more than 400 other journalists around the world, has obtained a significant number of SARs and supporting documentation from approximately 2008 through 2017 that reveal to the news agencies detail into the means North Korea (with the help of named Chinese companies) have attempted to and been able to evade international sanctions to the tune of approximately $175MM. Confidential reports of Iranian sanction busting were also revealed.

Closely following the Sept. 1 statement, FinCEN issued on September 14 a notice establishing standards for formerly exempt private and non-federally insured credit unions and trust companies; and, in a successive filing on September 16, FinCEN published an advance notice of proposed rulemaking (“ANPRM”) under the BSA seeking comment on proposed rules designed to enhance the effectiveness and efficiency of AML programs protecting the U.S. financial system.

NBC News: Secret Documents Reveal North Korean Money Laundering
FinCEN: Sept 1, 2020 Statement Regarding Unlawfully Disclosed SARs
FinCEN: Sept 14, 2020 FinCEN Issues Final Rule to Require CIP for Unregulated Banks
FinCEN: Sept 16, 2020 FinCEN Issues Advance Notice of Proposed Rulemaking (ANPRM)

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SDDCO Anti-Money Laundering Testing Services

The Small Firm Dilemma:

Your AML Test cannot be conducted by persons who perform the functions being tested or those who supervise that activity; for example, the AML compliance officer or members of your AML compliance team.

The Solution:

  • SDDco conducts independent AML reviews to determine, among other things, if your procedures address regulatory requirements.
  • Testing professionals at SDDco are Certified AML Specialists (CAMS) and members of the Association of Certified Anti-Money Laundering Specialists (ACAMS).
  • Our solution fulfills FINRA’s independent test requirements for Broker-Dealers.
  • We also support the AML obligations of Registered Investment Advisors.

The Consequence of Cheating: A Permanent Bar from the Broker-Dealer Industry

Michelle Abramowitz
Marketing Manager

Michelle Abramowitz

In response to the challenges presented by the COVID-19 pandemic, FINRA launched an online testing service for candidates seeking to take qualification exams remotely. FINRA’s Securities Industry Essentials (SIE), Series 6, and Series 7 exams and NASAA’s Series 63, Series 65 and Series 66 exams are all available to take remotely. These exams are proctored remotely by test center staff, and candidates use a camera-equipped computer to take the qualification exams. The concept of remote examinations may raise concerns about an increased ability to cheat on a FINRA-administered exam. As a result, FINRA has made it clear that, if an individual is caught cheating, “Enforcement will pursue disciplinary action against the individual and, in most instances, seek to bar them from the broker-dealer industry.” Test center staff will be employing new tactics to closely monitor test takers and ensure that test-taking experiences are fair in this remote environment.

FINRA Blog - Working on the Front Lines of Investor Protection - Test Cheaters Beware
Financial Advisor IQ - Cheating on Exams Almost Always Results in a Bar from Industry

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SEC Cites Deficiencies in Form CRS Filings

Ross Marlin
Associate Director

Ross Marlin

On July 27, 2020, the SEC said that its initial reviews have identified certain recurring Form CRS deficiencies.  The SEC noted that, while it has found examples of effective disclosures, it has also identified filings that lack required disclosures or could otherwise be improved. The SEC will communicate recommended changes to affected firms, and plans to host a best practices roundtable this fall.

SEC - Statement Regarding New Form CRS Disclosures

Learn more about how SDDco can help strengthen your firm’s Broker-Dealer or Investment Advisor compliance program.

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Transparency Concerns with the SEC’s Newly Proposed Form 13F Reporting Requirements

Casey Muller
Director of Legal & Internal Compliance

Casey Muller

The Securities and Exchange Commission (the “SEC”) has requested comments on their July 10, 2020 proposal to increase the reporting threshold for Form 13F reports by institutional investment managers from $100 million to $3.5 billion. The 13F form is required to be publicly filed by investment managers of a certain size, i.e. those with equity holdings that have an aggregate fair market value of $100 million. The proposal to raise the threshold to $3.5 billion would remove the public disclosure requirement for a large majority of investment managers. There are concerns that this would greatly reduce public transparency.

National Law Review - SEC Proposes Updated Form 13F Reporting Threshold
SEC - Reporting Threshold for Institutional Investment Managers
SEC - Comments

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Paychex Has Recently Come Out With A Way to Help You Through the PPP Loan Forgiveness Process

Elizabeth Drivas
SMB Sales Representative at Paychex

Elizabeth Drivas

How?

  • Creation of an easy-to-use PPP Loan Forgiveness Estimator within our Paychex Flex® platform
  • The Estimator prepopulates your payroll data and allows you to enter non-payroll costs
  • After you have reviewed the information for accuracy and made any necessary adjustments, our NEW Application Mode allows you to generate, save and print a signature-ready SBA loan forgiveness application.

This will help streamline the PPP loan forgiveness process. If you need help walking through this process or if this is something that would benefit you, please reach out to Elizabeth Drivas at (646) 228-5529 or edrivas@paychex.com.

SDDco SERVICE OF THE MONTH:

Broker-Dealer
Membership and Compliance

The SDDco Group, through its subsidiary, SDDco Regulatory Services provides full-service compliance consulting to both new and established broker-dealers (BDs) and Investment Advisers (IAs). This month, we are highlighting our broker-dealer practice.

What Services Do We Provide To BDs?

Our team of experienced consultants assists BDs seeking:

  • FINRA New or Continuing Membership Applications, Materiality Consultations, and Membership Agreement Changes
  • Ongoing regulatory compliance advice and support
  • CRD Registration Services
  • A qualified Series 24 registered consultant to serve as the designated Chief Compliance Officer (CCO) or other Principal roles

Why Should You Hire an SDDco Compliance Consultant for FINRA Membership Applications?

FINRA New Membership Application (NMA) requirements are extensive and exacting. SDDco Regulatory Services shepherds the entire process. Success hinges on understanding the client’s business, developing a clear and consistent presentation to the regulator and formulating appropriate responses to FINRA information requests. Our consultants are skilled and uniquely experienced in this meticulous process, having represented hundreds of firms of varying size and structure. SDDco-RS also assists with the FINRA Continuing Member Application (CMA) as it relates to changes in your current business. 

Why Should You Hire an SDDco Compliance Consultant for Ongoing Compliance Support?

We are experienced in providing ongoing support to broker-dealers of many stripes and sizes and our services are highly specialized. Our consulting team understands the business implications of complying with industry rules. We use that lens to determine the best advice for our client partners on how to remain compliant.  SDDco-RS offers a suite of compliance services on a retainer or project basis which always encourages frequent communication with our clients.

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

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Broker-Dealer Membership & Compliance Services Brochure

IN THE SPOTLIGHT

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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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