The Mutual Fund Dealers Association’s board of directors has approved a policy intended to establish minimum standards for dealers’ branch review procedures.

There are currently no specific standards for branch review requirements. Under MFDA rules, dealers are responsible for and required to supervise the conduct of each rep. And, the requirement to complete regular branch reviews is consistent with the obligations under the rules.

The MFDA reports that its staff have observed that some dealers have not implemented branch review procedures that are sufficient to allow them to meet their supervisory obligations. The MFDA has developed a proposed policy to provide guidance regarding the MFDA’s minimum expectations or branch reviews, while allowing firms flexibility to develop procedures that are appropriate to their size and business model.

The proposed policy was developed to ensure that certain minimum standards are observed in monitoring branch compliance. It will require MFDA members to implement a formal branch review program that prescribes criteria for branch selection, review procedures, reporting of results and proficiency requirements for branch reviewers.

The objective for each dealer is to develop a branch review program that maximizes their ability to detect potential problems, so that corrective action may be promptly taken. “By requiring that effective branch review programs be in place, the ability of members to assess and monitor the quality of supervision employed at their branches will be enhanced,” it says. “Members will be better able to ensure that branch managers have a complete understanding of their fundamental supervisory requirements and to provide ongoing education of staff and Approved Persons with respect to compliance issues.”