Narrator: Sarah, an advisory senior manager, is meeting with her PML
for her performance review. They start the conversation
covering personal independence, let’s listen in.
PML: So why don’t we start with personal independence.
Have you been good about continually confirming that the
investments in your KICS account are up to date?
Sarah: I decided to make my life easier and opened a managed account
so that I don’t have to do that.
PML: What do you mean?
Sarah: There’s a broker who makes the trades on my behalf. He manages
everything so I don’t have to check the restriction status or update
KICS, because the account is enrolled and activated for KICS Broker Import.
PML: Hmm, let me see if I can provide some clarification.
This topic can get to be a little confusing.
So, even if you have someone making decisions on your behalf,
you’re still responsible for complying with the independence requirements.
KICS Broker Import doesn’t block trades in restricted entities and if you
do acquire a restricted entity, it could result in financial sanctions.
Narrator: Sarah’s PML has helped her recognize that she
misunderstood the independence rules related to managed accounts.
By outsourcing her personal independence responsibility to her broker,
she has put herself in a position where she may have
potential independence violations.
Sarah: But I thought a managed account was different. I’m not
making the investment decisions, so I’m not responsible.
PML: Unfortunately, that doesn’t matter. You actually are
responsible and must ensure that all
investments are permitted before acquiring them in your account.
In fact, the firm actually discourages managed accounts unless it’s
a firm-supported option, like the Marcus Invest Program.
Sarah: I didn’t know about that. I guess I should think
about switching to that program.
Narrator: With the help of her PML, Sarah was able to evaluate the
independence implications of keeping the managed account open.
She now has to decide how to act. She can either leave the account open
with the potential for an independence violation if she gets selected
for a compliance audit, or she can close the account and be more proactive
in preventing any personal independence issues.
PML: Always remember, independence is not a responsibility you can
outsource to anyone – only you are accountable for maintaining
compliance with independence rules. So, whenever you have someone
trading on your behalf, you’ve got to make sure that you set up a protocol
with them to, number one, always check the restriction status of potential
investments, and number two, obtain your approval before
any investments are made.
Narrator: Sarah was lucky this time because her broker didn’t acquire
any restricted investments. But upon becoming aware that she
could be putting herself in a potential violation situation, she decided to act
timely and close the managed account. The next day,
she opened an account in the Marcus Invest Program
to ensure her compliance in the future.