SEC Allows BDs to Rely on RIAs for CIP But Increases Burden
The SEC’s Division of Trading and Markets has extended a broker-dealer’s
permission to rely on an investment adviser to perform its customer
identification responsibilities, assuming the BD satisfies several
conditions. The BD must perform adequate
due diligence on the adviser, which must be registered with the SEC. The agreement between the adviser and the
broker-dealer must require the adviser to (i) implement its own AML program,
(ii) perform customer identification as required by the PATRIOT Act, (iii)
disclose to the BD any suspicious or unusual activity to allow the BD to file
SARs, (vi) certify annually, and (v) provide books and records upon request.
OUR TAKE: The staff incrementally raised the bar by requiring more of an
investment adviser in the agreement.