Targeted Examination Letter on the Review of Cross-Selling Programs

October 2016

FINRA is conducting an inquiry regarding incentives for broker-dealer ("firm") employees to: (1) promote bank products of the affiliate or parent company ("affiliate/parent") to broker-dealer retail customers through referrals or direct sales, (2) add features (such as securities-based loans, credit or debit cards, or checking accounts) to broker-dealer retail customer accounts and (3) open additional broker-dealer retail accounts for customers (together referred to as "cross-selling programs").

For purposes of this request, "employees" refers to registered and non-registered individuals of your firm. To the extent any request made below does not apply, make an affirmative statement that the firm does not have any responsive documents or information.

We request the production of the following information (with supporting documents where noted) for the period from January 1, 2011, through September 30, 2016, by no later than November 15, 2016:

  1. A description (with supporting documents) of the firm's cross-selling programs.
  2. A description (with supporting documents) of the content and method of communication to employees of information regarding cross-selling programs.
  3. A description (with supporting documents) of monetary and non-monetary benefits to employees related to cross-selling programs.
  4. A description (with supporting documents) of metrics used to track and evaluate employees' performance related to cross-selling programs and the application of those metrics to performance ratings, promotion and termination decisions.
  5. A list of employees terminated or disciplined for not meeting production goals or for engaging in improper activities related to cross-selling programs.
  6. A list of broker-dealer retail customers who: (1) had accounts opened on their behalf without authorization, (2) had features added to their accounts without authorization, (3) had bank products of an affiliate/parent added to their accounts without authorization or (4) were reimbursed (include the reimbursement amount) due to improper activities related to cross-selling programs. Include a description regarding how the firm identified the customers represented in this list.
  7. A description of any revenues flowing to the firm from its affiliate/parent as a result of the referral of its broker-dealer retail customers to those entities or from the sale of bank products of the affiliate/parent to broker-dealer retail customers.
  8. A description (with supporting documents) of the firm's supervisory and compliance procedures, exception reports or other controls related to cross-selling programs, including those used to detect unsuitable or unauthorized sales of bank products of the affiliate/parent to the broker-dealer's retail customers or the opening of broker-dealer retail accounts without the customer's authorization.
  9. Written training materials and a description of oral training presentations related to cross-selling programs.
  10. A description (with supporting documents) of broker-dealer retail customer seminars that the firm conducted, or marketing materials that the firm used, regarding account features or bank products of the affiliate/parent and any funding the affiliate/parent provided for these seminars or marketing materials.
  11. A list of investor complaints, litigation, arbitrations or internal disciplinary or other actions related to cross-selling programs, including the nature of the allegation; the product, service or account type; the date the matter first surfaced; the name and CRD number of the subject employees and the status or disposition of the matter.
  12. A list of whistleblower, ethics, or other written, electronic or oral complaints (to the extent not covered above) related to cross-selling programs, including the substance of the complaints, the date the complaint was received, the name of the person (if available) making the complaint and the status or disposition of the matter.
  13. A description (with supporting documents) of escalation procedures to report, capture and respond to matters related to cross-selling programs. In addition, list those matters that were escalated and include the name of the person who raised the matter, its substance, date and status or disposition.
  14. A list of reviews by Internal Audit, consultants, law firms or other external parties related to cross-selling programs that includes the date, areas covered and recommendations, conclusions and actions taken as a result of the review.
  15. Reviews, inquiries, reports or other initiatives (collectively "matters") regarding cross-selling programs undertaken by the broker-dealer at the direction of its—or its parent company's—Executive Management, Board of Directors, or other executive management or board committees, including the dates and the areas covered by the matters. Designate those matters that were initiated at any time on or after September 1, 2016, that focus on assessing whether improper cross-selling programs occurred at the firm and indicate whether those matters have concluded or are ongoing.