In accordance with Consolidated FINRA Rule 3310 and MSRB G-41, and in an effort to comply with the requirements under the USA PATRIOT Act (in particular, Section 352 of such Act), the Company has established policies and procedures for the purpose of attempting to deter and detect money laundering activities by customers. The Company’s “Anti-Money Laundering Compliance Program” is not included herein; rather, it is maintained under separate cover. Every employee of the Company is expected to be familiar with the policies and procedures described in the AML Program and to make reasonable efforts to comply with them. Failure to do so will result in disciplinary action and possible subsequent termination of employment.
In accordance with Section 326 of the USA PATRIOT Act, Registered Representatives are required to attempt to identify any person attempting to engage in transactions. The Company’s AML Program, under separate cover, provides detailed procedures related to this requirement.
Hand in hand with AML CIP efforts is attention to foreign customers and whether they fall into the definition of ‘foreign official’ as described in the FCPA Policy herein. All new foreign customers must be vetted in an attempt to determine if this definition applies. Subsequent supervision by designated Principals of account activity and gifts/gratuities offered must be attuned to the requirements of the FCPA for the sake of identifying any violations.
The Company will comply with the FTC’s Fair and Accurate Credit Transactions Act of 2003 (FACT Act) regulations to the extent they are applicable to its business. Subject to further clarification from FINRA, to follow are relevant definitions from the FACT Act and the Company’s procedures for compliance with it:
• “Financial institution” means a depository or other institution that directly or indirectly holds a transaction account belonging to a consumer.
• “Transaction account” means an account that permits the account holder to make withdrawals for payment or transfer to third parties of securities or funds via telephone transfers, check, debit card or similar items.
• “Consumer” within these definitions refers only to individuals as customers, not institutions.
• “Creditor” means any person who regularly extends, renews, or continues credit or regularly arranges for the extension, renewal or continuation of credit. This would include introducing or clearing firms providing margin, or firms arranging loans, even if for institutional customers.
• “Covered accounts” means (1) an account offered or maintained primarily for personal, family or household purposes that is designed to permit multiple payments or transactions—i.e., “retail” accounts; or (2) any other accounts, including institutional accounts, if they pose a foreseeable risk to the Company’s customers or to its own safety and soundness from identity theft.
Red Flags Rules: The CCO has determined that the Company is required to implement a Written Identity Theft Program under the FACT Act. This Program will be made available to all personnel by the announced enforcement date. Company personnel are required to comply with all identity theft prevention procedures, which are incorporated herein by reference.
Credit and Debit Card Rules: The Company is either a “financial institution” or a “creditor” as defined in the FACT Act and it issues credit and/or debit cards to its customers. Therefore, Compliance personnel have established the following procedures relating to address change notifications from credit or debit card holders:
When the Company receives an address change notification and also receives (within at least 30 days) a request for an additional or replacement card, Company personnel may not issue an additional or replacement card until the Company has either:
1. Notified the cardholder of the request at the cardholder’s former address or using any other means of agreed-upon communication, such as e-mail or telephone, and provided the cardholder with a reasonable means of promptly reporting incorrect address changes; or
2. Otherwise assessed the validity of the change of address in accordance with its internal policies and procedures.
Notices to customers must clear and conspicuous, and separate from regular correspondence, so as to get the attention of the customers. Validation of address changes may take place prior to receipt of requests for new cards, in which case, no second validation would be necessary.
The Principal designated to oversee compliance with these procedures is CCO. He will conduct spot check review of address change notifications, validations of changes and issuance of replacement/additional cards and will evidence those reviews by initialing the respective documentation. Instances of non-compliance will be met with additional training and disciplinary action, if warranted.
Consumer Reports Rules: The Company may request consumer reports on individuals from consumer reporting agencies (CRA’s). It therefore has developed the following procedures addressing the receipt of notices of address discrepancy from CRA’s:
If, after requesting a consumer report about a new or existing customer, the Company receives a notice of address discrepancy from the CRA, personnel must attempt to verify that the consumer report actually relates to the customer in question. To make his determination, personnel may use current, internal address information (such as that obtained during CIP verification or on applications or change of address notifications) or third-party sources such as trusted public records. Personnel may also directly contact the customer for verbal or e-mailed confirmation of the address.
If personnel cannot reasonably believe that the consumer report relates to its customer, the Company may not use that report. Such circumstances should be brought to the attention of the AML Compliance Supervisor to determine if further investigation is necessary.
All records relating to these procedures should be maintained with the respective customer’s account records. Designated Principals, in their customary and periodic reviews of account set-up and account activity, will spot-check for compliance with these procedures and will document any required follow-up to instances of non- compliance.