By James Langton

(January 4 – 16:00 ET) – The Investment Dealers Association is reminding dealers what rookie reps can and can’t do for their firms.

A working group of the IDA’s Education and Training Subcommittee of the Retail Sales Committee has been reviewing training requirements and has determined that there are differences among firms in how the “no client contact” rule has been interpreted.

Under that rule, individuals in training programs (90 days for those applying as registered reps and 30 days for those applying as investment reps) are not permitted to have contact with customers or prospective customers in “obtaining, taking or soliciting orders for or advising on trades in securities, as they are not yet registered.” As well, they must not receive commission splits as any part of their compensation.

To clear up any confusion, the working group has developed guidelines, which have been approved by the Retail Sales Committee. Under these guidelines, trainees may:

  • Gather information from existing or prospective clients on behalf of another registered rep, including assisting clients with inquiries about their accounts and giving quotes, provided that candidates do not open any client accounts until they are fully registered;
  • Contact the public, including sending out introduction letters, inviting the public to firm seminars, and forwarding non-securities specific information; and
  • Create and research lists of potential clients for future follow-up work.

Candidates who are already registered to sell mutual funds can continue to deal with their existing mutual fund client base in the purchase and sale of mutual funds only. They cannot solicit or take on any new clients during the 90-day training period, nor can they transact in non-mutual fund securities with their existing mutual fund client base.

Trainees may not do anything that would be considered acting in furtherance of a trade, including:

  • Provide any recommendations, opinions or advice with respect to securities, either in writing or verbally;
  • Open client accounts;
  • Complete know-your-client information on a New Account Application Form or KYC form other than the biographical information at the beginning of a form completed on behalf of a registered rep;
  • Solicit, accept or process any orders, including unsolicited orders; and
  • Distribute under their own names research reports to clients or prospective clients containing security-specific comments, recommendations or opinions. However, they can, acting on behalf of other reps, distribute literature including research reports provided such literature is approved for distribution by the member firm and/or the supervising branch manager.