Workman Securities Corporation

1
Workman Securities Corporation

• 2005 Compliance Meeting
• 11 August 2005

2
Introduction

• Opening Remarks
• Logistics, bathrooms, breaks, internet people
• Todays agenda

3
Agenda

• 100 Opening Introduction
• 115 Compliance Issues
• 205 Break
• 215 Compliance Issues
• 305 Break
• 315 Compliance Issues
• 405 Break
• 415 American Funds Presentation
• Peter Nyhus

4
Regulatory Element of Continuing Education Program

• NASD NTM 05-20 amended Rule 1120 to eliminate
  exemptions
• Three Regulatory Element programs
• Failure to complete places representative into
  inactive status. Representative prohibited from
  performing any duties and functioning in any
  capacity requiring registration
• Attached is listing as of 2/18/05

5
Firm Element of Continuing Education Program

• Each year firm must conduct a Needs Analysis and
  prepare a Plan Document
• Complete required courses at www.financialcampus.c
  om by December 15
• NASD mandated requirement
• WSP section 1550 for review

6
Outside Business Activities

• Form update required yearly
• Registered Representative Fined and Suspended for
  Engaging in a Business Activity for Compensation
  Away from His Firm - NASD settled a matter
  involving a registered representative who, while
  associated with an NASD member, also was employed
  at a casino.  The representative failed to
  provide prompt written notice of this outside
  employment to his member firm.  NASD held that
  the representative's actions violated Conduct
  Rules 2110 and 3030, suspended the representative
  in all capacities for three months, and fined him
  5,000.
• WSP section 415 for review

7
Selling Away

• Indexed Annuities
• Fixed Insurance products in general
• Registered Representative Barred for Selling
  AwayNASD Regulation settled a matter that
  involved selling away to 10 public customers. A
  registered representative sold promissory notes
  involving two different issuers away from the
  member firm with which he was associated. For the
  sales, he earned commissions of approximately
  45,000. NASD Regulation concluded that the
  registered representative sold away from his firm
  and barred the representative from further
  securities industry employment.
• Registered Representative Suspended and Ordered
  to Pay Monetary Sanctions for Selling AwayNASD
  Regulation settled a matter involving three
  instances of selling away during a one-month
  period. Under the terms of the settlement, NASD
  Regulation found that the transactions were "for
  compensation," imposed a fine of more than
  2,500, and required the registered
  representative to pay restitution in excess of
  7,000. NASD Regulation also suspended the
  registered representative in all capacities for a
  period of one month.

8
Financial Independence CorpWorkman Securities
Insurance Division

• Dana Vietor brings 26 years of annuity, life and
  LTC experience to you to increase your business
  and is glad to help you with any marketing
  questions or run any quotes you need for your
  clients.
• Linda Kokjohn, our licensing and new business
  coordinator, processes all rep fixed business
  licensing applications and your new business
  applications. She reviews all of your new
  business and processes your applications on the
  day of receipt, if all information supplied is
  complete.
• Chris Greiner, our pending business coordinator,
  tracks all of your fixed business client
  applications to policy completion once your
  application has left our office to go to the
  carrier. She keeps you informed as to the status
  of your client application.

9
Preferred Carriers

• American General
• Banner
• First Colony
• Jefferson Pilot Financial
• John Hancock (Manulife)
• Lafayette Life
• Met Life Investors SPIA
• Mutual of Omaha/United of Omaha
• West Coast Life

10
Linda Kokjohn New Business Contracting Manager
11
Licensing/Contracting

• Request and submit agent contracting to Linda
  Kokjohn
• Agent contracting must be dated prior to
  application date
• Current resident non-resident insurance
  licenses
• Agent contracting will not be completed or
  approved until business has been submitted
• If you have a fixed carrier that we are not
  currently appointed with and you want to write
  their product through us Let Us Know !!!

12
New Business

• Complete applications
• Illustrations
• Current resident non-resident insurance
  licenses
• Agent contracting will not be completed or
  approved until business has been submitted
• If you have a fixed carrier that we are not
  currently appointed with and you want to write
  their product through us Let Us Know !!!

13
Chris Greiner Pending Business Coordinator
14
Pending Business

• Complete applications cannot be stressed enough
• Prompt return of information from the
  representative requested by the carrier through
  the pending business department will speed the
  acceptance of the application by the carrier
• The best form of up-to-date communication today
  is through email

15
All of your fixed production dollars go toward
your total annual production. . . retroactive
to day one!

• 50,000 base contract payout is 80
• Plus 25,000 fixed insurance GDCs
• 75,000 total equals 85 payout
• 2,500 retroactive increase on the base 50,000
  plus 1,250 increase on the fixed business or
  3,750 increase in the commission to you

16
Thank you! Workman Securities representatives
for the life, annuity and long term care
business you have placed with us!
17

• We would like to reintroduce you to
• Benefit Retirement Services, LLC.

18
Jim Halpin Account Administrator
19
Plans Administered

• 401(k)
• Profit Sharing
• Money Purchase
• Group 403(b)

20

• Since November, 2004 we have grown from 0 to
  22 million dollars in assets under
  administration.

21
Plan Expenses

• Plan Installation
• Plan Setup Consultation 300.00
• Per Employee Installation 6.50
• Plan Document 400.00
• Annual Plan Services
• Base Annual Fee 900.00
• Per Participant 22.50
• Per Event Services
• Loan Processing Establishment 75.00
• Annual Loan Processing 25.00
• Qualified Domestic Relations Order 50.00
• Brokerage Accounts 50.00
• Life Insurance Policies Processing 50.00
• Document Mainteince Fee 75.00

22

• For being a Workman Security Representative we
  only offer you special pricing on all new plans
  and new monies coming into Workman Securities.
• Effective August 1, 2005 we offer our new 50/50
  Plan.
• If you have a potential client that would like
  to save money on their administration expenses
  you can offer him FREE services and give him a
  reason to make a change. How can you do this?
  Heres how
• If you have a client with a million dollar
  investment and his annual administration costs
  are 2000.00 a year you, the representative,
  would pay Benefit Retirement Services 1000.00
  and we would waive the other half of the
  administrative costs.
• The million dollars goes to Workman Securities
  as new monies with an average GDC of 2 or
  approximately 20,000 with a payout of 85 which
  equals 17,000 the administration cost of
  1000.00, you are still making 16,000 plus
  receiving on going fees for each deposit.
• This waiver of fees is good for the first plan
  year only.

23
Takeover Checklist

• Service Agreements associated with Funding
  Sources and current TPAs' if any
• Adoption Agreement
• Basic Plan Document associated with the Adoption
  Agreement
• Summary Plan Description
• All amendments to the plan
• Loan policy if the plan provides for loans
• Most recent valuation
• Prior years annual report including compliance
  testing
• Last three years IRS Form 5500 reports and
  related schedules
• Employee Census which includes
• Social Security Number
• Name
• Sex
• Date of Birth
• Date of Hire
• Compensation mode frequency

24

• Thank you!!

25

• Benefit Retirement Services, LLC
• 119 3rd Ave NE
• PO Box 757
• Independence, IA 50644
• Toll free 1-800-899-8371 or [phone]
• cmenken_at_indytel.com or jhalpin_at_indytel.com

26
U-4/U-5 Updates

• NASD continues to emphasize timely updates
• Representatives have a continuing obligation to
  keep the information disclosed in their
  respective Form U-4s current by reporting, in
  writing, any updates or changes to the
  information previously reported. Amendments to
  the Form U-4 must be filed with the NASD within
  30 days of the event that triggers the reporting
  requirement.
• If in doubt check with Compliance

27
Personal Brokerage Account Disclosure Form

• Brokerage and investment accounts
• Disclosure is required
• WSP section 445 for review

28
Private Securities Disclosure Form

• Permission required/Disclosure required
• NASD Rule 3040 states
• Prior to participating in any private securities
  transaction, an associated person shall provide
  written notice to the member with which he is
  associated describing in detail the proposed
  transaction and the person's proposed role
  therein and stating whether he has received or
  may receive selling compensation in connection
  with the transaction provided however that, in
  the case of a series of related transactions in
  which no selling compensation has been or will be
  received, an associated person may provide a
  single written notice.
• WSP section 1200

29
Business Cards and Stationary

• Recent NASD audit tasked us to improve
• Workman Securities Corporation name and address
  must be on cards and letterhead.
• Submit samples to Home Office for review and
  approval

30
Do Not Call List

• Becoming increasingly important from compliance
  viewpoint
• WSC is member of Do Not Call Registry
• Representative is not to conduct cold calling
  without prior permission
• Review WSP section 1555

31
529 Plans/Municipal Securities

• 529 Plans are classified as municipal fund
  securities and are governed by the rules of the
  Municipal Securities Rulemaking Board (MSRB)
• Must be Series 7 or 52 qualified or if
  representatives municipal securities activity is
  limited to only transactions in 529 Plans then
  Series 6 qualified
• Expect more oversight to be forthcoming in the
  529 arena
• Expect more information in the whole municipal
  securities world as well

32
Anti-Money Laundering/Clients With Cash

• Regulatory importance cannot be emphasized enough
• Incorporated throughout our WSPs review
  sections 1510 and 2700. Special review given to
  Money Laundering Red Flags and Know Your
  Customer Rules
• Much is happening at the Broker Dealer level
  ie, FinCEN requests made direct to Broker Dealer,
  new account information checked against U.S.
  Treasurys Office of Foreign Asset Controls
  (OFAC) Specially Designated Nationals and
  Blocked Persons (SDN) list, etc.

33
New Account Forms

• Time spent here is time well spent
• One of the most important documents NASD auditors
  look to for information
• Directly connected to AML issues, suitability,
  etc.
• Representative must sign and date
• Frequency of updates should be addressed

34
Medallion Guarantees

• Know as Signature Guarantees
• No Signature Guarantee will be performed without
  a fully completed Request for Signature Guarantee
  form approved by Home Office
• Signature Guarantee is not a notary
• The Guarantor stands behind the transfer and is
  liable and responsible if the transfer of
  ownership is challenged based upon the signature
  guarantee

35
Recent RIA Regulatory Developments

• New SEC head Christopher Cox
• SEC is looking at updating Form ADV through the
  IARD system, debate continues regarding
  differences with States will probably wait for
  new SEC head
• Email recent action taken against Banc of
  America Investment Services for failure to
  preserve email information interesting aspect
  of this case was that Banc of America utilized a
  software vendor to help automate the firms email
  compliance program. Unfortunately the system did
  not work and the SEC was not sympathetic to this
  fact
• Disposal of Consumer Report Information as of
  July 1 the disposal rule requires investment
  advisers that maintain or possess consumer
  report information for a business purpose to
  take reasonable measures to protect against the
  unauthorized access to or use of the information
  in connection with its disposal.

36
Creative Wealth Strategies

• R. Brook Hanson, CLU, ChFC, AEP
• President Creative Wealth Strategies
• Modern Portfolio Theory
• Reasonable Cost
• Breakpoints based on total assets per rep

37
Email/Communication With The Public

• E-Mail Retention
• Rule 17a-4(b)(4) requires broker-dealers to
  preserve originals of all communications
  received and copies of all communications sent
  (and any approvals thereof) by the member, broker
  or dealer (including interoffice...) relating to
  its business as such, including all
  communications which are subject to rules of a
  self-regulatory organization of which the member,
  broker or dealer is a member regarding
  communications with the public

38
Email/Communication With The Public

• How Long/How E-mails Need to be Retained
• General Requirement 3 years
• Opening or Maintenance of Account 6 years
• RIAs 5 years (2 years in the office)
• Rule 17a-4(f) states that
• Electronic storage media must preserve the
  records in a non-writable, non-erasable format

39
Email/Communication With The Public

• Penalties
• Banc of America - 1.5million 6/15/05
• Deutsche, Goldman Sachs, et. al. 8.25 million
• Edward Jones - 75 million (part)
• Jefferson Pilot - 625,000 and censure
• Raymond James failure to supervise
• Schield Management - 175,000 (destroyed)

40
Advertising/Sales Literature

• NASD allows some filings via Web-based
  application
• All communications must be fair, balanced and not
  misleading
• If in doubt call Compliance
• Provide for sufficient lead time

41
Annual Compliance Meeting

• NASD Rule 3010(a)(7) requires each registered
  representative participate annually in Compliance
  Meeting
• Recently completed NASD audit tasked us to
  improve
• NASD Rule provides Member Firms with flexibility
  in implementing Compliance Meeting expect to
  see continued changes

42
Compliance Audits of Non-Registered Detached Site
Locations

• Recent NASD audit tasked us to improve
• Important audit checklist items
• Safeguarding of customer funds and securities
• Maintaining books and records
• Transmittal of funds between customers and
  registered representatives and between customers
  and third parties
• Validation of customer address changes
• Validation of changes in customer account
  information

43
Variable Annuity Sales

• NASD concerns regarding unsuitable
  recommendations continues to be a priority
• Over 80 NASD disciplinary actions in last 2 years
  against Member Firms
• Recent NASD audit tasked us to look for
• Excessive switching
• Misleading marketing
• Failure to disclose material facts
• Unsuitable sales
• Inadequate training and supervision
• Inadequate written supervisory procedures
• Importance of Switch Letter where appropriate
• Review WSP sections 610 and 615

44
Mutual Funds Sales

• NASD priorities continue to be unsuitable
  recommendations, breakpoints and B share sales
• NASD NTM 04-30 concerned with sales practice
  obligations related to sale of bonds and bond
  mutual funds
• Importance of Switch Letter where appropriate
• Review WSP section 620

45
Conclusion

• Closing Remarks
• Final Questions
• Thank You

46
Keynote Speaker

• Peter Nyhus, Senior Vice President, American
  Funds Service Company