Creating A Compliance Roadmap For Managers Of Agents
Increasingly, managers are finding themselves in the uncomfortable position of being held accountable by companies and regulators for the market conduct and compliance of the agents who work for them, report to them and work with them.
According to both managers of captive agents and managers of independent agents (e.g., managing general agents), the workload of monitoring and supervising has increased as companies have shifted much of the close supervision of market conduct to the agents immediate manager.
In some cases this manager is the registered principal and his responsibilities may include endorsing the suitability of variable product applications, correspondence review, periodic audits and annual audits. The responsibility of registered principals is mandated by the NASDs guidelines that all broker/dealers must live by.
But even for non-registered products, companies are seeing the manager as their first line of defense against market conduct problems and holding them responsible for supervision and monitoring of the market conduct of their agents.
A significant part of the compliance supervision workload is answering questions and resolving issues that occur related to new business and complaints. Some questions can be answered quickly, because the manager is knowledgeable about the agents procedures or the case, but more often the manager must gather information to answer the question. This takes time to accomplish and to document. Agents whose business is delayed or questioned because of market conduct issues come to the manager for his help, and this also takes time.
For managers with many company relationships the challenges are even greater. They must follow up on changes to different company policies and procedures and keep up-to-date on what each company expects. If they dont, they may find that they are monitoring the wrong things.
In addition, they must educate their agents and their agents staffs regarding many companies compliance and market conduct procedures. It is an important, but sometimes difficult, task keeping agents and their administrative staffs up-to-date on compliance and market conduct policies and procedures.
Managers who carry out their supervisory duties diligently also find that they are spending time conducting audits or reviews of the files and practices of their agents. Even if these reviews are not mandated by companies or broker/dealers, the compliance-savvy manager wants to be able to demonstrate that he actively carried out his supervisory duties.
A manager knows that if an agent creates a market conduct problem, he needs to be able to defend himself from the accusation that he was negligent in carrying out supervisory duties.
The compliance and market conduct supervisory workload is proving so great that many managers are hiring administrative specialists whose jobs are primarily compliance- or market conduct-related. However, delegating responsibility has to be done carefully. There is a fine line between delegating and abrogating responsibility. Delegating supervisory responsibility to an inappropriate person or failing to supervise the tasks delegated can create as bad a problem as not supervising.
The market conduct-savvy manager understands the liability that comes with supervisory responsibility, and some managers are rightly nervous about being held accountable. Fines, disciplinary actions and loss of contract are some of the unpleasant things that can happen to managers who do not properly carry out their supervisory responsibility.
Many managers feel overwhelmed by the amount and type of work associated with supervising compliance and market conduct. Part of their problem is that they do not have a clear plan for supervising and monitoring compliance. They need a "roadmap" to navigate the complexities of compliance supervision so that they can more easily carry out their responsibilities.
The following are the steps that managers can take to create their own "roadmap."
1. Identify all of your supervisory responsibilities.
Check contract or selling agreements. There may be responsibilities outlined in those agreements that carry with them the responsibility to supervise and monitor. For example, some managers contracts assign responsibility for training to the manager, which may include delivering and supervising compliance training.
Question companies with which you have a relationship regarding whether you really have the responsibility for agents in your office based on explicit or implied supervisory responsibility. For example, some companies pay agents an additional stipend for managing a detached office. Does this imply that these agents have supervisory responsibility for the other agents that work out of the office?
Get a specific description of your supervisory responsibilities from each company with which you have a relationship. Make certain it is in writing and that it identifies what you will be held accountable for. For example, reviewing the suitability of applications, maintaining appropriate agency files, reviewing correspondence, conducting audits, keeping up-to-date manuals and files, etc.
Identify the "emergency" or non-routine types of compliance supervision, such as a regulator complaint, home office investigation, etc., in which you may be involved. Though these responsibilities cannot be planned, you should still know what is expected of you when one of these situations occurs.
Ask the companies with which you have a relationship if you have any responsibilities for agents administrative staff. Some managing general agent contracts hold the general agent responsible for the administrative staff in the agency.
Document and organize these responsibilities. If you have a relationship with only one company, this amounts to a list. If you have relationships with a number of companies, this becomes a matrix, since responsibilities may vary across companies.
2. Identify the information that needs to be used to carry out the responsibilities you have listed.
Identify when each supervisory responsibility has to be accomplished. Some responsibilities are required on a per-application basis or on a monthly, quarterly or annual basis.
Reorganize your list in terms of when the responsibility must be carried out. Begin with the most frequent activities.
Identify the information, e.g., reports, that have to be used to carry out your responsibilities. Include this information in your list or matrix.
Identify the information that needs to be maintained or documented, e.g., forms, checklists, etc., as you accomplish your responsibilities. Include this in your list or matrix.
3. Identify the guidelines that must be followed in carrying out these responsibilities.
Make copies of the company procedures and policies that provide directions in carrying out your supervisory responsibilities. This information will serve as a reference.
Make copies of the forms and reports that must be completed. Obtain properly completed examples of all forms and reports to serve as a reference or template.
