NASAA Encourages Broker-Dealers to Develop Heightened Supervision Plans

The North American Securities Administrators Association ("NASAA") advised broker-dealers to review and develop heightened supervision plans for registered representatives regarded as high-risk for improper conduct.

Based on the conduct of a coordinated examination report, NASAA found that heightened supervision plans could be effective in rehabilitating registered representatives who had received complaints. According to NASAA, 90 percent of firms with a registered representative on a heightened supervision plan reported no complaints against that representative.

NASAA advised that, when crafting a heightened supervision plan, broker-dealers should ensure that:

• qualified individuals are assigned to enforce the plan;

• written documentation proves that registered representatives are aware of the conditions of the plan and supervisors are aware of their responsibilities;

• the plan's effectiveness is periodically reviewed; and

• registered representatives are removed from plans only after all of the necessary criteria are met.

NASAA also encouraged broker-dealers to design their plans to address:

• the misconduct of the particular registered representative;

• the registered representative's records that will be part of any review; and

• the frequency of reviews.