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A Small General Securities Broker/Dealer
(Prepared for 1996 contents page) In analyzing the training needs of the personnel at the Firm we have looked at the following factors:
Needs Analysis and Corporate Training Program After reviewing these factors, we have arrived at decisions regarding how the Firm intends to comply with these new regulations. FIRM DEMOGRAPHICS The Firm is a corporation located in [City]. The main office location is at: [Address]. The corporation as a whole is comprised of four office locations inclusive of the main location. Other offices are located at [Location]. REGISTRATION OF PERSONNEL Each office location consists of one Series 7 licensed individual. Each of these Series 7 licensed personnel is also a licensed insurance agent in [State]. In addition to the Series 7 personnel, the main office location has a General Securities Principal, and a Financial Operations Principal. Two of the Series 7 licensed personnel were licensed in 1991 affording them 5 years of experience. The remaining two Series 7 personnel were licensed in 1989, affording them 7 years of experience. The General Principal of the firm was licensed in 1989, and the Financial Operations Principal was licensed in 1993. The overall sales staff then ranges from 5-7 years of sales experience. PRODUCT MIX AND RISK Upon review of the products that the Firm sells, it is apparent that we are a very conservative investment firm. This is not surprising when one considers that we exist in a rural and extremely conservative market. We looked at areas where we trade extensively. These areas are: * Blue Chip Equity Securities * Mutual Funds: Equities * Mutual Funds: Fixed Income, Tax-Free, etc. All three of these would be considered trades incurring low risk. This is where the highest concentration of our trading exists. Secondly, we examined areas where we trade moderately. These areas are: * Municipal debt * Growth Equity Securities * Growth, small cap, sector mutual funds In these areas of trading, we incur low risk on the municipal debt, and moderate risk on the growth equity securities and the growth and small cap mutual funds. Thirdly, we have examined areas where we trade in a very limited way. For convenience, I have broken them out in groups of low risk, medium risk, and high risk trades. Low Risk * Certificates of Deposit * Corporate Debt * Insurance Medium Risk * Low-rated corporate debt High Risk * Low-priced securities * Margin accounts To summarize, the majority of the firm's trading exists in the low risk areas. The Firm does not engage in the trading of options or futures. Although we are capable of selling penny stocks, the firm strongly discourages engaging in such trading. The needs analysis included a risk assessment that offered an interesting and valuable perspective. To further enhance the risk assessment, a discussion of revenue by product line and an analysis of customer suitability by product area would have helped to determine areas of risk both to different types of customers and to this Firm. Additionally, a chart or table showing the relative amounts of revenue from each product area would illustrate the Firm's findings more dramatically. SALES FORCE DEMOGRAPHICS Experience: Two of the representatives have 5 years sales experience. Each of these individuals also has an insurance license with the State which requires 15 hours of continuing education every year. Many of these credits are attained in the study of annuities. Two representatives have 9 years experience, and both are insurance licensed with the State as well. Education: All four representatives are college educated individuals. Reviews: In speaking with the representatives, as well as reviewing their audits, the three areas of common concern are : * Low-priced securities * Corporate Debt * Margin accounts All four representatives should be scheduled for the Regulatory Element CEP within the first 18 months of the program. OTHER FIRM FACTORS The Firm itself feels it is important to further train the representatives on the new T + 3 schedule. Although this adjustment has gone without incident thus far, we would like to ensure its continued smoothness. We have recently begun using a second clearing firm whose policies and procedures are different from those [with which] the representatives are familiar. We have already completed four hours. Because of the market in which we do business, we would like to address the promotion of CMOs by competitive firms. Our representatives need to increase their understanding of the CMO market in order to better address competitive products. The Firm is very small (six registered personnel, including two principals) with a limited product line. As a result, it has less complex training needs. It identified training needs due to T+3 and a new clearing firm and the bond market, including CMOs. The needs analysis fails to consider additional critical factors that include customer complaints, internal and external disciplinary actions, and new rules relating to products and services currently offered by the Firm. Even if the Firm has nothing to report in these areas, the topics should be reviewed. AVAILABLE DELIVERY SYSTEMS There are numerous avenues which the Firm could use to accomplish this training. They are: * Professional Education Seminars * Internal Memoranda * Annual Compliance Meeting * Computer-Based Training * Video Viewing * Audio Tape Listening * Telephone Conference Calls The Firm plans to use some combination of these media each year to accomplish our training. The avenues used will differ depending on the areas concerned. In some instances the insurance seminars will serve some of our purposes. CONCLUSIONS Because of the size of our firm, and the limitations of our manpower, the Firm has investigated several outside firms to provide us with the training we require. After thorough investigation, we have chosen [Vendor] as the supplier of these services. After reviewing the factors involved, product risk level, product mix, level of expertise of our representatives, education, etc., it has been decided that four hours of training is an appropriate amount of time to accomplish our goals. We will begin the first year concentrating on our new clearing firm, T + 3 regulations, and a study of the bond market. Subject to any changes, we will be using our second year training on equities. A strong percentage of the representatives' business is done with mutual funds; however, they are extremely familiar with this area, and for that reason we have elected to spend our near future time in other areas. The commentary on this plan is not meant to suggest that a small firm's continuing education plan must be dozens of pages long to satisfy Firm Element requirements. Under the Firm Element all firms must analyze current and future business priorities, regulatory examinations, internal or external audit findings, customer complaints, litigations and arbitrations, and relevant regulatory changes, but outlining the significant data, providing a cogent analysis of needs, and linking this analysis to a specific training plan may only take a few, carefully structured pages for a small firm with a limited line of business. This Firm's inaugural continuing education plan lacks a clear explanation of the analysis that resulted in the conclusions found in the training plan. It is not clear how the training needs were prioritized or how the three training topics were selected. For example, CMOs are identified as a training need, but are not one of the three training topics selected. Also, the conclusion that four hours of ontinuing education are sufficient is not explained. Additional specificity as to training course content is necessary to address this open question. There is an attempt to coordinate the Firm Element with insurance continuing education, but the need for training on insurance products is not clear in this plan. Nor is it clear whether each covered person will be required to complete the training on each of the three topics. Additional detail is critical to address these issues. The plan should offer more specifics concerning training topics and when and how the training will be conducted. The Firm Element mandates an annual needs analysis and training plan. The assertion that the following year's training efforts will focus on equities must be reaffirmed in the following year's needs analysis. Finally, the person or persons responsible for the needs analysis, training plan, and oversight of the training programs should be identified. |
