Seventeen Days in the New Branch
An FCM opens a new two-person branch in a leased office above a hardware store. The designated branch office manager passed the Series 30 exam three weeks ago, but NFA has not yet approved the branch office registration. The other staffer, hired as a 'marketing associate,' is not registered; he quotes bid/ask spreads to callers, describes spread strategies, and told one caller, 'I'd buy the March contract here.' The branch manager also learns that the other AP's registration lapsed for four months before she joined this firm, and that neither person has completed the firm's annual ethics training, which was due in January. The office has been open 17 days and has 14 customer accounts.
1. Separate what may proceed before approval from what may not. What must the branch manager do today?
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What may proceed: administrative and back-office functions that involve no customer solicitation or order handling, office build-out, hiring paperwork, registration filings, and training.
What may not: solicitation of customers, opening accounts, accepting or transmitting orders, and holding the office out as a supervised branch - from an unregistered branch office with an unapproved manager. The designee's exam pass does not substitute for approval, and passing the Series 30 does not authorize acting as branch office manager.
Today:
- Stop customer-facing activity at that location. Calls route to a registered, supervised location until approval is granted.
- Get the 'marketing associate' off the phone. He has been quoting prices and recommending a contract; that is order solicitation by an unregistered person. Cease it immediately.
- Verify the applications: branch registration, the manager's Form U4, and the office address. Confirm what NFA actually has on file rather than what the home office says it sent.
- Document the 14 accounts and which person opened each, with dates - this dates the exposure.
Escalate to the firm's compliance officer the same day. Delay converts a paperwork gap into a solicitation violation.
2. Address the unregistered 'marketing associate': what has happened, what are the registration options, and what about the 14 accounts?
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What has happened: he performed functions reserved to registered APs - describing strategies and recommending a specific contract to a customer. Title does not control; the activity does. A 'marketing' label does not create a non-registered safe harbor for solicitation.
Options:
- Register him if the firm wants him in a sales role: Form U4, fingerprinting, background check, exam requirements, and supervision until registered. He stays off customer calls until the registration is effective.
- Confine him to genuinely non-soliciting work - preparing approved literature, scheduling, data entry - with a written description of permitted tasks and monitoring that actually catches a lapse.
The 14 accounts:
- Identify which opened from activity by an unregistered person. Those openings need review: were they properly approved, was the customer given accurate information, and does the firm want to retain them?
- Remediation is not 're-paper and move on.' Re-confirm each account with the customer through a registered supervisor, document the conversation, and correct any misstatement made during the opening.
- Preserve the call records and any written communications he sent; the retention obligation applies whether or not the sender was registered.
3. The lapsed registration and the missed ethics training: what is the manager's exposure and what is the remediation?
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The lapsed registration: a four-month gap before she joined means either she was not acting as an AP during the gap - in which case confirm it - or activity occurred while unregistered. Ask for the prior firm's termination notice and confirm the lapse was non-working. If she solicited during the gap, that is a disclosure question for her U4 and a potential problem for this firm's supervision of her since hire.
The ethics training: it was due in January and both people are overdue. The manager cannot certify training that did not happen, and a branch that is two-for-two overdue is a supervision finding waiting to be written.
Remediation plan, dated:
- Schedule and complete the training within a defined short window for everyone in the branch, not just the two, and retain completion records.
- Build a training calendar with a named owner and a monthly exception report to the home office.
- Verify every AP's registration status, U4 accuracy, and outside-business disclosures on a fixed cycle, with the results signed by the branch manager.
- Report the 17-day operating gap and the overdue training to compliance in writing, with the corrective steps and completion dates.
The manager's exposure is that both facts were discoverable on day one and were not checked. The memo should say what was found, when, by whom, and what changed - not that the branch 'will be more careful going forward.'