Horter News

Third Party Distribution Requests

Compliance Today Blog #7 February 6, 2018 Third Party Distribution Requests Today we will be discussing third party distribution requests.  Assisting clients with distribution requests is a recurring service that advisors provide to their clients.  We want all advisors to be aware that there are increased risks when the request is to send money to a third party.  As the advisor, you should have a heightened awareness whenever you receive a third party distribution request.  Once the money leaves the client’s account, it may be impossible to get it back if it turns out to be a fraudulent transaction. Know your client. Criminals may use phishing attempts or other social engineering schemes to try to get you to process a distribution from a client account.  Know who you are dealing with at all times and never request a distribution based on email communications alone. Horter will only process a third party distribution request that has been submitted on a properly executed distribution request form that has been signed by the client.  As added protection, Horter will contact the client to confirm the transfer and the transaction will be reviewed by our Chief Compliance Officer, Jason Long, prior to disbursing any funds. As the advisor, you are the first line of defense in protecting your clients against unauthorized distributions.  Be wary of any red flags, including but not limited to: Emails supposedly from the client that say they are unable to talk on the phone and must communicate via email. Emails that communicate using language that is not consistent with other legitimate email communications you have received from your client, including inconsistent grammar or punctuation, poor spelling, etc. Requests that state time is a critical factor and the distribution must be done immediately or the client will be harmed in some fashion...
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Outside Business Activities

Compliance Today Blog #6 September 20, 2017 Outside Business Activities Welcome back to another edition of Compliance Today!   Our goal is to continue bringing you information on compliance topics relevant to you and your practice.   Today we are discussing Outside Business Activities.  Almost all of our advisors are engaged in other business activities beyond just their role as an Investment Adviser Representative under Horter.  If this applies to you, then it is important that you understand the compliance responsibilities that come with engaging in these other activities. An Outside Business Activity (“OBA”) is an activity where a registered person is compensated, or has the reasonable expectation of compensation, from someone other than their Registered Investment Adviser (e.g. Horter).   It may also be an activity where a registered person may not be compensated, but the activity may still create a conflict with Horter or its clients.   Certain non-compensated charitable activities may be considered an OBA where the registered person has access or control over charitable funds or investments. There are two important regulatory reasons for monitoring Outside Business Activities: (a) Form ADV disclosure purposes and (b) Form U4 disclosure purposes. A Registered Investment Adviser is required to disclose to clients all potential and actual conflicts of interest, including outside activities of the firm and its related persons, on the Form ADV Part 2.   In addition, Investment Adviser Representatives (“IARs”) must disclose their employment history for the previous 10 years and their current outside business activities on the Form U4.   As an IAR, it is ultimately your responsibility to keep your Form U4 current and accurate.   You must be cognizant of the 30 day deadline for making material updates to the Form U4.   Changes to your Outside Business Activities are considered a material change.   Failure to keep a current and accurate Form...
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Client Referrals

Compliance Today Blog #5 September 13, 2017 The Do’s and Don’ts of Client Referrals We all know that the best compliment a client can give is a referral to your business. And as our parents have always taught us, when someone gives you a compliment you say thank you.  When it comes to clients referring potential new clients to your practice, saying thank you is literally all you are allowed to do.  We receive a lot of questions surrounding what is appropriate and allowed in regards to client referrals, so today’s compliance blog is dedicated to answering these questions for you. The acquisition cost for a new client generated from a client referral is about as low as you are likely to find in the investment advisory business.   Some prospective clients may come to you from educational classes, while others may come to you from your advertising and marketing efforts.  Not only do these approaches cost money, but you still need to win the prospective client’s trust and respect before they will enter into an investment advisory relationship with you.  Referrals, on the other hand, cost no money to generate, and the prospective client is already inclined to view you positively. It is a natural reaction, therefore, to want to engage in actions that maximize the number of referrals you receive from existing clients.  If my client is referring business to me now, imagine how much business they will refer if I compensate them somehow for referrals.   And this is where we receive the majority of our advisor questions. Under no circumstances can you directly or indirectly compensate clients for referring business to you, or otherwise provide them with something of value in exchange for a referral.   Compensating clients, directly or indirectly, for referrals can inadvertently turn them into solicitors...
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