6 Common Compliance Questions Answered

Vital to your business, yet painstakingly time-consuming and complex, compliance is an essential function of your business. While it can seem like being compliant is an inefficient use of your time and gets in the way of “real work,” it is actually one of the most important safeguards for your company.

To help you understand why we stress compliance at both CreativeOne and our in-house broker-dealer, Client One, we interviewed our Senior Director of Compliance, Sarah Mlynek, and Client One’s Chief Operating Officer, Sandy Monical, on the subject of compliance in today’s industry.

  1.  What is the difference between the SEC and FINRA? How do they work together?

Sandy Monical: The Securities and Exchange Commission (SEC) is a governmental agency. One of their responsibilities is implementing and enforcing securities laws that have been passed by Congress. The Financial Industry Regulatory Authority (FINRA) is a self-regulatory agency supervised by the SEC. The SEC must approve new FINRA rules or revisions before they can go into effect. Broker-dealers are regulated by FINRA. Registered investment advisors (RIAs) are regulated by either the SEC or the state securities administrators (depending on the size of the firm). Hybrid firms (both a broker-dealer and RIAs) are regulated by both.

  1. Why do registered reps and licensed insurance agents have different compliance regulations?

Sandy: The laws that govern securities and insurance are different. Securities laws and rules are the SEC, the state securities administrators are FINRA. Insurance laws are created and governed by each individual state. Reps and agents don’t perform the same functions and therefore have to be regulated by different entities.

Sarah Mlynek: Agents and representatives have different regulatory bodies. Registered representative and producers have similar market-conduct risks, but also some differences due to the activities each is permitted to do. Registered representatives and producers have different compliance departments because both industries have separate rules and regulations that have to be abided by to ensure their content and products are up-to-standard within their industry. So, while something could be complaint for a licensed insurance agent in a certain state, it may not be compliant for a registered rep, subject to the laws where they live.

  1. Why should agents care if their information is compliant? 

Sandy: For a registered representative or investment advisor representative (IAR), they can be fined, suspended and/or have their securities registrations revoked. With that, in 2015, FINRA imposed fines for advertising violations of $11.8 million, which was actually down from the 2014 fines of $17.2 million. That amounts to a lot of advisors’ hard-earned money being wasted on fines.

Sarah: They should care because non-compliant marketing brings on a plethora of risks i.e., reputational, legal and regulatory risks, all of which can hurt their business.

  1. What benefit or service do we provide our clients when we run their materials through compliance for them? 

Sandy: If the advisors we work with don’t submit their materials through our compliance, they may be fined, suspended or terminated with cause.

Sarah: Our producers are able to utilize our expertise in compliance best practices and known areas of market-conduct risk to ensure their firm avoids the potential problems that can arise by not knowing the rules.

  1. Where can registered reps or licensed insurance agents find information on the compliance information that applies to them?

Sandy: Registered reps IARS have to follow the policies of their broker-dealer and/or RIAs. Individual firms have the right to impose policies that are stricter than the rules.

Sarah: Insurance agents can check with their state’s department of insurance, the carriers they are contracted with or CreativeOne.

  1. How can an insurance agent/registered rep stay up-to-date on what is and is not allowed with any marketing material or content they put out?

Sandy: Simple. If they’re not compliant with both, they risk losing their licenses and/or registrations.

Sarah: Each license is separately regulated and has separate requirements. Neither one trumps the other, so it’s imperative to be compliant with both to avoid regulatory, legal and reputational risk.

Compliance is important. Always be sure to know the requirements of your regulatory bodies and the carriers you represent.  CreativeOne is here to help.  Call your sales consultant if you have questions at 800.992.2642.



CP-0713 – 2016/05/04

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