Compliance

Do Not Call Compliance for Your Company

Telemarketing is an important marketing tactic.  It’s popular because it works.  However, with the rise in legislation surrounding telemarketing it is equally important that you and your company stay in compliance.  Otherwise, you could be hit with large fines that cut into your bottom line.

Here are some Do Not Call compliance guidelines you can use when making calls.

  • Scrub your sales leads.  Buy a sales leads list that has been scrubbed against the Do Not Call registry.  You can also create an online account and scrub your leads on a regular basis.
  • Call time.  Do not call people before 9am or after 8pm.  Otherwise you could be violating state calling rules.  Each state has different guidelines so you may want to confirm the time restrictions in your particular state.
  • Keep an internal list.  You are responsible for keeping an internal list of people that do not want to be called by your company for a minimum of five years.  Whether you keep the list electronically or manually, make sure you have a back up in case something happens.
  • Inform your staff.  Each business is responsible for educating their staff about the DNC guidelines and how to follow them.
  • Create an internal policy.  Companies are required to have an internal policy and procedure manual surrounding the Do Not Call rules and regulations.  This should be written by management and reviewed by an attorney to ensure that you are 100 percent in compliance.  This is particularly important if you are calling multiple states.
  • Run business number.  Technically, most B2B calls are not covered under the Do Not Call guidelines.  Their is a caveat.  Business owners often use their personal phone numbers or cell phone as their business line.  These personal phone numbers can end up on the DNC registry.  This makes it important to scrub your business sales leads as well.

There are safe harbor guidelines that prevent companies from getting fined when they make innocent mistakes.  In order to prove that you made an “innocent mistake” you have to follow these best practice guidelines.  Feel free to include more of your own, but the point is that you need to be able to show that you are doing your best to stay in compliance with DNC guidelines. It is natural for people, and businesses, to make a mistake.  Just be prepared to demonstrate your compliance practices when you do.

You can stay up to date on regulation and learn more about best practices by visiting https://www.donotcall.gov/ or reading our blog for further updates.

Houston Firms Charged for Undisclosed Transactions

The SEC has charged two investment firms in Houston, Parallax Investments LLC and Tri-Star Advisors, along with three of their executives, for “engineering thousands of principal transactions” through a brokerage firm they are affiliated with without disclosing it to their clients.

In addition to these charges, a Chief Compliance Officer of one of the firms was charged with violating the custody rule relating to the holding of client funds or securities.
The charges come down to a conflict of interest.  Since the investment firms used an affiliate, without disclosing it to clients, they had a conflict of interest that clients were not made aware of or able to avoid.

According to the SEC Parallax Investments LLC and Tri-Star Advisors conducted thousands of securities transactions which led to John P. Bott II, owner of Parallax, and William T. Payne and Jon C. Vaughan, CEO and President of Tri-State Advisors receiving over $2 million in compensation.

In other words they used their affiliation to trade client shares and receive large fees for doing so.  Their clients were not informed, nor did they provide consent.  Payne and Vaughan were the primary beneficiaries of the scheme and received over half of the $1.9 million the firms collected for these transactions, over 2,000 total from 2009 to 2011.

Marshall Sprung of the SEC said,“By failing to disclose principal transactions and obtain consent, Parallax and Tri-Star Advisors deprived their clients of knowing in advance that their advisers stood to benefit substantially by running the trades through an affiliated account.”

The investment firms appeared to be full participants as they  used their inventory accounts to buy mortgage-backed bonds from the others clients. They would then transfer the bonds to their own client accounts.  This trading went back and forth between the two companies with executives on both sides pocketing millions of dollars.

These “principal transactions” are when an investment adviser buys from or sells to a client account using an affiliated broker dealer. The SEC requires that clients are informed and agree to these activities in writing in order to avoid a situation like this where clients end up paying millions in fees while their broker receives additional benefit.

The additional custody violations came because Parallax was an adviser to the private fund Parallax Capital Partners LP.  The rule states that Parallax needs to have a suprise exam once a year or have a registered PCAOB-registered auditor audit their fund.  The company did have their fund audited but they didn’t hire a PCAOB-registered auditor in 2010. They also didn’t deliver the financial statements within the required 120 days.

The SEC found that the company and its Chief Compliance Officer, F. Robert Falkenberg were aware of the deadline and that their auditor was not approved but hired the auditor anyway. Falkenberg and Bott are charged with aiding, abetting, and causing the custody and compliance violations that Parallax is facing.  These charges are under the Investment Advisers Act of 1940.

The SEC regularly investigates companies and investment firms to look for fraud.  Investors that are concerned about affiliations between firms or other potential violations can complain using their tips hotline.