Targeted Examination Letters

October 2010

 

Re:  Placement Agents

 

FINRA is reviewing activities of member firms acting as or working with placement agents in soliciting and/or obtaining business with municipalities and public pension funds. We request your firm produce the following information for the period from January 1, 2009 to September 30, 2010. In connection with this review, please provide all documents relating to this request no later than November 1, 2010.

 

  1. A list of municipalities and public pension funds for which financial services1 were provided where your firm employed the services of a third party to solicit and/or obtain this business;
     
  2. For those municipalities and public pension funds identified in response to Item 1, describe what financial services were provided, the dates the services were provided, and the total amount of compensation earned for the services;
     
  3. A list of clients for which your firm acted as a placement agent or provided third party marketing services2;
     
  4. For those clients identified in response to Item 3, describe what financial services you marketed for the third party, which municipalities or public pension funds were solicited, the dates the services were solicited, and the total amount of compensation earned for the services;
     
  5. A detailed description of the compensation structure for your firm's services related to the requests number 1, 2, 3 and 4 above. Include in your explanation descriptions of any compensation such as directed order flow or other soft dollar arrangements;
     
  6. A copy of the all of the firm's written policies and procedures during the relevant period relating to (a) its placement agent business; (b) its supervision of political activities and contributions; (c) compliance with MSRB Rules G-37 and G-38; (d) its supervision of Municipal Finance Professionals (MFPs) as that term is defined by the MSRB; and (e) outside business activities;
     
  7. Copies of all G-37 reports filed with the MSRB during the relevant period;
     
  8. Copies of any political contribution disclosure/request form filed by any employee of the firm during the relevant period.

 

This request is made pursuant to FINRA Procedural Rule 8210. This request should not be construed as an indication that FINRA has determined that any violations of the federal securities laws or FINRA rules have occurred, or as a reflection upon the merits of the securities involved or any person who effected transactions in such securities.

 


 

1 For the purpose of this request, financial services includes activities such as asset management, proceeds investment or re-investment, trade execution, custodianship, asset valuation/appraisal, pension management or investment services, payroll management or administration, or money manager consulting services.

 

2 Third party marketers may also be known as placement agents, solicitors, or third party intermediaries.  A third party marketer likely receives from its clients:  1) expense reimbursement; 2) on-going retainers; 3) finder's fees based on business obtained or earnings from business received; and/or 4) some type of continuing "trailer fee".