S2:E7 | Fees, Expenses, Billing--Oh My! | Compliance In Context

The Securities Compliance Podcast: Compliance In Context

Welcome back to the Compliance In Context Podcast! On today’s episode, we we welcome in Melissa Loner, the Executive Vice President of Advisor Services at Premiere Wealth Management and current NSCP board member. With a background in compliance but with a focus now on running the business, Melissa is the perfect person to share with us all the best practices when it comes to fees, expenses, and firm compensation, and the types of questions should be asking themselves when setting up a billing system.

In our Headlines section, we examine yet another FINRA warning about a new Phishing Email Campaign targeting BD and RIA firms and discuss some changes in leadership at the CFTC. And finally, we’ll wrap up today’s show with another installment of What’s On My Mind, where we explore how a key element of acoustic design could be a critical component of your defense during an SEC examination.

Headlines

• FINRA recently alerted members to another phishing campaign involving the use of fraudulent FINRA domain names: “@finrar-reporting.org,” “@Finpro-finrar.org,” and “@gateway2-finra.org.”

• CFTC Commissioner Brian Quintenz who recently announced that he will be leaving the office at the end of August 2021.
• Quintenz has been a notable crypto advocate for the duration of his term
• In his statement upon departure, he highlighted his work on cryptocurrency issues

Interview

• In your mind, what are the biggest challenges with billing and issues around fees and expenses?
• What are some of the best ways an adviser can mitigate these challenges and issues?
• NSCP Compliance Forum discussing the threshold for refunds to be paid out
• Should firms need to disclose all the situations in which they’re not going to refund fees under a certain amount?
• What were the lessons learned from the Share Class Disclosure Initiative?
• What are some best practices around documentation?
• What types of activities are included here?
• What are hallmarks of a successful billing program?

What’s on My Mind

• The history of unwanted sound
• The job of acoustic design
• Using acoustical privacy as a key line of defense during an SEC exam

Quotes:

“The best thing I can tell people is processes and disclosures. As you were asking the question we talked a little bit about, ‘Is there a monthly fee or a quarterly fee? Is it charged in advance or is it charged arrear? Is it charged on a 360 day or a 365 day? Is it refunded at what period of time?’ So there’s a lot of what ifs that come into place and I think that’s what gets people hung up.” - Melissa Loner “The more flexibility you have, which you want to have for advisors and advisors want to have that for clients, but it puts in a larger risk to not have everything that’s needed to be done. I know you’re going to ask about this later but it goes to disclosure, it goes back to processes, it goes back to consistency.” - Melissa Loner

“Disclosures is a big one because that’s the first place that the regulators are going to go. They’re going to go to your disclosure and then they’re going to match that up to the billing that you’ve been doing. And, in addition to that, they’re also going to match that up to your supervisory procedures or your clients’ manual or your operations procedural to ensure that you’re following that consistently.” - Melissa Loner

“So one of the best practices that I largely suggest is to have an annual process where you look at how your billing is actually happening and then review all of those documents to ensure that they’re actually reflective.” - Melissa Loner

“You’ve got to make sure that the trifecta of your disclosures, and your brochures, and your advisory agreements match what you have for your internal compliancies and procedures and your internal controls. And if you can marry those three things in a way that is consistent, it’s at least going to, hopefully, give you a foundation for success.” - Patrick Hayes

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