The dealer’s policy manual is a long document that many advisors never read. But it’s important to be aware of the ramifications of ignoring this document before you take that risk, as it can get you fired or in trouble with regulators.

At the time that the terms of agreement are entered into between a dealer and an advisor, a copy of the dealer’s policy manual is provided to the advisor along with a document to sign confirming that the advisor has read, understood and will adhere to the terms of the dealer’s policy manual. Dealers tell their advisors to sign the form every year to confirm that they have read, understood and agree to the terms therein — as amended from time to time.

The problem is the dealer’s policy manual is usually more than 100 pages of drab provisions; reading it is boring and time consuming. Understanding the context of some of the terms is difficult, especially as it is read in a vacuum. Very few, if any, advisors take the time to read it, especially when they are just beginning at a new dealer and there is usually a ton of work to do to transfer clients over or to build their businesses, which is usually much more important to advisors than reading a long, dull, manual. So, invariably, advisors sign the document but have not read it, understood it or digested it. That is where the problem begins.

The dealer’s policy manual is reviewed in each of the three circumstances, none of which is good for the advisor who has not read and adhered to it:

1. When the regulator investigates an advisor for any infraction, whether or not it’s related to a client complaint.

2. When the court reviews whether you have violated your obligations to a client.

3. When a dealer evaluates an infraction an advisor committed to determine whether there’s cause for termination.

Taking all of this together means that you could be penalized by the regulator, lose your sponsoring firm and your job if you violate the provisions of your dealer’s policy manual.

As an example, an advisor — let’s call her Jo — inadvertently breaches an internal policy related to carrying on outside business activities. In this case, Jo borrowed money from her old Aunt May as Jo was divorcing her husband and needed to pay exorbitant legal fees. Jo didn’t tell Aunt May the reason she needed the money as Aunt May didn’t approve of divorce having been married to Uncle George for over 60 years. Jo agreed to pay Aunt May back within a year. However, Aunt May is also a client. That means Jo has borrowed money from a client, which is both a regulatory infraction and a policy manual breach. When Aunt May finds out the money was for a divorce lawyer, she writes to the dealer insisting on the transfer of her account and the repayment of the loan.

The client complaint and infraction, borrowing money from a client, must be registered with the regulator. Furthermore, Jo may be terminated by her dealer. The regulator or self-regulatory organization may investigate the matter; and even if Jo finds another dealer to sponsor her licence after termination, the registration may not be approved until such investigation is completed, which can be several months or even more than a year in length. Furthermore, even though this activity may not convince a court that Jo was terminated for cause, funding a lawsuit to sue your dealer is very expensive. Of course, there may be a lawyer who will take the case on a contingency basis, but it will take years to get this through the courts to trial and even then the dealer may appeal the decision.

All this is to say that you need to set aside several hours to read the dealer’s policy manual and understand it. Read those provisions relating to the basic requirements as well as the portions that most relate to you first. If you don’t understand certain provisions, then email your compliance officer or branch manger and keep a copy of the email.

If you are reading a hard copy, then use a pen or highlighter and keep the copy to prove that you read it. If you are reading a digital copy, email yourself documenting when you completed your review of each section. This will prove you actually read the manual.

Although the dealer’s policy manual is long and dull, you need to find the time to read it and remain fresh on the issues so that if a situation presents itself, you can review the section of the manual that addresses it and save your licence, your reputation and your livelihood.