Narrator: Chris, a tax manager, is completing his quarterly independence
confirmation when he notices that one of his spouse’s brokerage accounts
was not activated for KICS Broker Import timely. He reaches out to Risk
Management - Independence for assistance. During the conversation,
they discover he also has some accounts held through investing apps.
Let’s listen in.
Independence: Thank you for letting us know that your spouse’s brokerage
account wasn’t activated for KICS Broker Import.
You’ve confirmed that all of your other brokerage accounts are
enrolled and activated for KICS Broker Import, so that’s good to know.
Have you also considered whether you or your immediate family members
have any brokerage accounts through an investing app?
Chris: What do you mean by ‘investing app’?
Independence: Robinhood, Acorns, Wealthfront and Stash are
a few of the common ones. These apps often allow you to make
commission-free trades online, but they’re considered brokerage
accounts and are subject to the independence rules and KICS Broker
Import requirements. There are many independence risks
associated with these accounts.
Chris: I do have a Robinhood account that I opened a month ago and
have been actively trading through it. They even gifted me an investment
just for opening the account. My wife also told me that she opened an account.
Independence: Robinhood, as well as many other investing app brokerage
accounts are not brokers that participate in KICS Broker Import,
so you and your immediate family members are not permitted to have
Robinhood accounts.
Chris: Oh, I didn’t realize that. I didn’t think of it as a brokerage account.
I was manually updating KICS with the investments held through
our accounts and none of them are restricted.
Independence: Because the accounts were opened with a broker
that doesn’t participate in KICS Broker Import, you’ll need to close the
account right away. You could transfer your unrestricted investments
to an account with a participating broker that is enrolled in
KICS Broker Import.
Narrator: This call helped Chris recognize that
that the brokerage accounts he holds through investing apps are in violation
of the independence policies because they are not held with brokers that
participate in KICS Broker Import. During the consultation, Chris evaluated
his options and he now has to make a decision. He can leave the
accounts open a little longer to make more money… Who would know
if it’s just a few more days? Alternatively, he can close the accounts now,
as instructed, and make sure that all future trades are made through
his accounts that are enrolled and activated for KICS Broker Import.
Chris: I didn’t realize that investing through these types of accounts was
an issue, especially if I was checking KICS before making any trades.
But I don’t want this to come up during an independence compliance
audit, so I will close these accounts right away.
Thank you for bringing this to my attention. It’s important to me
personally and professionally that I get this right.
Independence: Make sure your wife and any other immediate family
members understand the independence rules as well.
Your wife will also need to close her investing app account.
And if you’re transferring the permitted investments, make sure
they’re transferred to an account with a participating broker that’s
activated for KICS Broker Import.
Narrator: Chris decided that the right thing to do was close the accounts
right away. After this discussion, he liquidated the accounts
and ensured that his wife closed hers as well.