Protecting senior investors remains a hot button issue for FINRA and an integral part of its exam modules.  So, it's not surprising that FINRA's latest Regulatory Notice focuses on  firms' fair dealing with senior investors, as well as investors at or approaching retirement (together referred to as senior investors). In Part One - posted Friday, 11/11/11 (linked), we reported on the findings of FINRA's 2011 Senior Designation Survey - these results, in part, prompted FINRA to issue Regulatory Notice 11-52. ^{_{*********************************************************************}} Today's Part Two discussion focuses on: (i) sound practices;  (ii) designation standards and supervision;  (iii) communications with the public;  (iv) training;  (v) annual attestations. 1.  Sound Practices. Keep in mind this RegNote isn't a comprehensive summary of all compliance and supervisory matters pertaining to senior designations.  And, as with all matters relating to pols and procedures, any new practices a firm chooses to adopt should be assesses against its own current practices and related to the profile of its customers. Most firms appear to have adopted and implemented some form of policies and procedures governing the use of senior designations.  The Take Away: If your firm or client has not, DO SO NOW! Some suggestions:  (i) simply ban the use of senior designations;  (ii) require prior approval before registered persons can use a designation;  (iii) establish procedures for monitoring compliance. Follow NASD Rule 3010, which requires each firm to establish and maintain a system to supervise the activities of each registered person that's reasonably designed to achieve compliance with applicable securities laws and regulations and FINRA rules.  Refer to RegNote 07-43, that says supervisory procedures must be so designed to prevent registered persons from using a senior designation in a manner that is unethical or misleading. Failure to address those issues can lead to violations of FINRA Rule 2010, NASD Rule 2210, NYSE Rule 472, and possibly anti-fraud provisions of the federal securities laws and FINRA rules.

• NASD Rule 2210 and NYSE 472 prohibit firms and registered persons from making false, exaggerated, unwarranted or misleading statements or claims in communications with the public.
• This prohibition includes referencing nonexistent or self-conferred degrees or designations or referencing legitimate degrees or designations in a misleading manner.
• Remember that all advertisements and sales literature - as defined in NASD Rule 2210(a), including communications that include the use of these designations, must be approved prior to use and in writing by a registered principal.
• Firms may also want to consider adopting some of the practices and procedures described below, as appropriate based on their circumstances - e.g., reduce the chance that customers are confused or overrely on a designation by ensuring that registered persons use only those designations that instill substantive knowledge to better serve and protect senior investors.

^{*********************************************************************} 2.  Designation Standards and Supervision. Consider whether the following practices are a good fit for your firm.  Not every firm has adopted each of these standards and supervisory procedures. Some firms prohibit designations that don't have:  (i) a rigorous curriculum;  (ii) an emphasis on ethics;  (iii) continuing education requirements;  (iv) a method for determining the registered person’s status regarding the designation;  and/or  (v) a public disciplinary process. Some firms require their registered persons using designations must remain current - i.e., take continuing education or fulfill other requirements necessary to remain in good standing. Some of these same firms require their registered persons to demonstrate a level of experience in retirement planning and other related matters, as well as the ability to work with senior investors. Many firms consider whether a designation is recognized by a reputable or accredited organization and whether the issuing organization, which abides by a code of ethics or a standard of professional conduct. ^{*********************************************************************} 3.   Communications With The Public. By conducting comprehensive reviews of advertising, sales lit, correspondence and emails, many firms can detect:

• registered persons using self-conferred or misleading designations without the knowledge of the firm; and/or
• designations being used that have not been earned or approved.

Other procedures employed by firms include the following:

• require registered persons to use only business cards or letterhead stationery that have been prepared centrally and approved by the firm.
• prohibit use of senior designations during sales seminars or “free lunches,” when senior investors would be most vulnerable.
• use key word searches to identify designations in correspondence and emails.
• conduct unannounced branch visits to ensure, among other things, that a full sampling of advertising, sales lit and correspondence is "captured."

^{******************************************************************} 4.   Training. Firms often require registered persons to attend training sessions focused on:  (i) retirement planning;  (ii)  ethics in working with senior investors;  and/or  (iii) proper use of senior designations in advertising, sales lit and correspondence. ^{********************************************************************} 5.   Annual Attestations. Finally, it's time to "CYA" - protection for both the firm and its registered persons.  To detect situations where adopted designations may have slipped through the cracks - i.e., bypassed pre-approvals - it makes tremendous sense to add the following questions to the firm's periodic certifications:

• whether the registered person uses one or more senior designations;
• if so, what designations do they use;
• whether to designation is self-conferred or issued by a sponsoring organization;
• what, if any, continuing education requirements did they fulfill since the last attestation; and/or
• are are they in good standing with the sponsoring organization.

Registered persons should always be reminded that FINRA comes down hard on individuals who provide false or misleading responses on attestations.  Use of a designation that, for whatever reason, hasn't been approved by the firm could, let's say, lead to a $5,000 fine and 15 day suspension.  Persons that compound the violation by falsely attesting that he or she has not used a senior designation - when, in fact, they had - oftentimes will be barred from the industry.  Put that in their pipes and let them smoke it.