SDDCO #1 in the Nation ~ Outsourced Pros for Broker-Dealers ~ FinOps & CCOs
The SDDCO Group of CPAs and Consultants Named
Number 1 Leading Outsourcing Firm for Broker-Dealers
The SDDCO Group (“SDDCO”) was cited in a new research study on 200 consulting firms that perform the CCO or the FinOp role on an outsourced basis for broker-dealers and also register with that firm. The study was conducted by Greg LaRoche, Founder and CEO of LaRoche Research Partners LLC.
In this February 2017 study entitled “Leading Outsourcing Consultants for Broker-Dealers,” La Roche states, “More and more, small to medium-sized broker-dealers are outsourcing certain administrative jobs, such as the roles of the Chief Compliance Officer (CCO) and Financial and Operations Principal (FINOP), to outsourcing consultants… approximately 38% of all broker-dealers (1,490 of 3,938) are associated with one or more outsourcing consultants. Broker-dealers outsource these positions for a variety of reasons, but mostly to gain expertise, reduce costs or both.”
The SDDCO Group, was listed as the #1 “Leading Outsourcing Consulting Firm” in the nation. See methodology here. Calculations were based on data gathered on January 3, 2017.
How to Hire an Outsourced FinOp
To further assist broker-dealers looking to outsource their FINRA required financial and operational responsibilities, SDDCO assembled the checklist below. Considerations include industry rules, provider reputation, background access, service models, face time, and fees.
SDDCO’s 10 Essential Tips for Broker-Dealers Outsourcing Financial Duties
by Teri Daniels
Broker-dealers have more to deal with these days. More regulatory requirements. More filing deadlines. More demands for transparency. Consequently, it’s more of a challenge to run a brokerage firm while buttoning up the books, filing all the reports, and keeping the regulators satisfied.
The Right FinOp Matters:
Every US broker-dealer (“BD”) is required to hire or align with a FINRA Series 27 or 28 licensed professional. A Series 27 Financial & Operations Principal (“FinOp”) is empowered to perform the mandatory financial and operational functions of all BDs while the Series 28 license is limited by net capital rules. (NASD Rule 1022).
Outsourcing the FinOp Role:
Assigning the FinOp position to an outside professional who will register with the BD is a FINRA approved option. For many firms, it’s a better option in terms of the high price of talent and experience. But as with any position to fill, understanding the job and properly evaluating the candidates is paramount.
An Informed FinOp Decision:
What every BD should know before engaging an outside FinOp:
1) Know the industry guidelines:
The NASD Notice 06-23 dates back to May of ’06 but still states best the regulatory expectations of the FinOp position.
2) Know a FinOp’s reputation:
Network, research, and get references. Does a FinOp have a good rapport with clients? Maintain a good reputation with regulators? Hold other FINRA licenses or a CPA?
3) Know a FinOp’s field experience: Does the FinOp serve more institutional BDs or retail? Foreign securities or domestic? Emerging firms or established? Proprietary trading or private placements? Third party marketers or underwriters? Large BDs, midsize, small?
4) Know a FinOp’s track record:
Get a detailed report on an individual FinOp by searching the FINRA BrokerCheck database.) Find qualifications, employment history, and criminal or regulatory events, if any.
5) Know a FinOp’s workload: FINRA’s BrokerCheck also lists current registrations, quantifying the number of BDs an individual consultant is already servicing. There’s no official limit, but over a dozen firms per consultant could be overboard. On the flip side, if a FinOp is not registered with at least one firm, that FINRA license expires after two years of inactivity.
6) Know the levels of FinOp support:
An outsourced Assistant FinOp supports the in-house FinOp. A Designated FinOp is the licensed professional on record with FINRA and responsible for supervising the financial and operational duties. A CFO/FinOp assumes a variety of additional responsibilities.
7) Know the BD’s back office needs:
Discuss the capabilities of the firm behind the FinOp. Does the firm also perform payroll and accounts payable? Bookkeeping, accounting, and tax? Regulatory compliance and CCO functions? Multiple resources under one roof could afford convenience and more integrative service.
8) Know the duties a FinOp should assume:
Here’s the meat of it: (a) keeping accurate books and records; (b) preparing monthly financial statements; (c) performing member duties in line with Securities Exchange Act of 1934; (d) computing and monitoring net capital per SEC Rule 15c3-1; (e) filing timely reports, including the FOCUS, monthly or quarterly; the SSOI and Custody Report quarterly; the SIPC, semiannually; and the FINRA Assessment Report, annually; and (f) interfacing with auditors and regulators.
9) Know the FinOp’s work time and face time:
Will work be done remotely, on-site or in combination? Will the on-site FinOp visits be monthly, quarterly or less? Will others be on the service team? And will mobile numbers be shared for faster access? Fully understand the resource allocation and accessibility.
10) Know the dollars involved:
Compare the fees of an outside FinOp to the salary and benefits package cost of a full-time hire. Outsourcing the role can secure direct access to higher-level talent than a BD might otherwise afford.
Connect with The SDDCO Group
Reach out to an SDDCO partner to discuss your broker-dealer needs:
- Call Us: 212-751-4422
- Email Us: firstname.lastname@example.org
- Ask Us: contact form
About The SDDCO Group
Formed in 1952, The SDDCO Group (www.sddco.com) delivers outsourced professional support to the financial services and technology sectors. Our menu of professional services includes accounting, regulatory and tax compliance, AML testing, brokerage hosting and supervision, as well as assuming designated FinOp, CCO, and CFO roles.