I've been trained that a manager must be on branch premises at all times, but my local managers say having access by email or phone suffices. Is this kosher?
A. G., Ky.
I am not aware of any specific requirement for a branch manager to be physically present. FINRA Notice to Members 99-45 reads "Rule 3010(a)(2) requires that a member assign responsibility for each type of business that the member conducts to one or more principals. ... The rule requires that principals be appropriately registered and vested with the authority to carry out the supervision for which they are responsible."
The notice goes on to say that "certain types of activities" (e.g., order execution) are sufficiently vested with regulatory significance that the locations where members conduct these types of activities require special recognition and attention. Such locations or offices are designated as offices of supervisory jurisdiction (OSJ). The rule further states that "in all cases, ultimate supervisory responsibility for every registered and unregistered branch office must be assigned to one or more appropriately registered principals."
So while a supervisor must be "assigned" to a branch, that supervisor can work from an OSJ and even then different supervisors can be delegated different responsibilities. However, even for a non-OSJ branch, I would expect one or more supervisors to at least visit periodically. If they are not visiting the branch and a problem arises, I think they would have a difficult time demonstrating that their system of supervision was reasonable.
We are a registered investment advisory firm. We have an employee who wishes to roll over her 401k to a brokerage firm where we do not custody assets. The brokerage firm is asking for something they call a "407 letter". I'm not sure what they're asking for. Can you help?
C. W., Wis.
The reference to a "407 letter" is a holdover from the old NYSE Rule 407, which has since been incorporated into the FINRA manual. Rule 407 provided that, "No member shall, without the prior written consent of the employer, open a securities account or execute any transaction in which a member or employee associated with another member is directly or indirectly interested." A 407 letter therefore is provided by a broker-dealer to another brokerage firm and sets forth the approval for the employee to maintain an outside account.
On occasion, a broker-dealer may request one from a registered investment advisory firm in order for the broker-dealer to obtain an assurance that the RIA knows about and approves the employee's account at the other custodian. The letter itself should be relatively simple and should indicate that you're aware of and approve the account.
Alan J. Foxman is an attorney with the law offices of Rita G. Dew, P.A.
and a senior consultant with National Compliance Services
in Delray Beach, Fla. He can be contacted at: this email address.