A new firm in Florida wants to tackle a common problem that independent B-Ds have supervising and inspecting their far-flung branch offices, otherwise known as offices of supervisory jurisdiction, or OSJs. With the SEC's new Regulation Best Interest looming, there are concerns in some quarters about OSJs' ability to comply with the new rules.

Sander J. Ressler, a compliance expert for some 30 years, says that in worst-case regulatory scenarios, a branch office thousands of miles away from its supervisor may intentionally or unintentionally fall out of compliance in its financial product sales. He says that undetected selling away and undisclosed outside business activities on the part of small OSJ branches carry severe legal and regulatory penalties. The home IBDs might not be aware of them, yet those lapses could bankrupt them.

For a flat fee, his new firm, Essential Edge Compliance Outsourcing Services LLC, offers an outsourcing option for firms wanting to inspect their far-flung OSJs and keep them compliant.

Ressler, co-owner and managing director, launched the firm with Beth C. Barak, the co-owner and director of the consultancy. Barak has experience in client relationship management, project management, program start-ups and communications (she was most recently the associate director of communications for the Division of Research at Florida Atlantic University). Ressler has more than 30 years of compliance supervision experience with broker-dealers and RIA firms.

The firm and its more than 10 compliance professionals have set out to inspect OSJs and financial advisor practices affiliated with independent B-Ds of all sizes throughout the country, helping them identify and resolve compliance issues in their branch offices’ sales and operations before these issues escalate into expensive, time-consuming regulatory and legal matters, Ressler says.

He adds that Essential Edge’s solutions are particularly applicable to small OSJs, which he defined as independent branches affiliated with IBDs encompassing one to three independent financial advisors, averaging less than $250,000 in annual revenue per advisor.

“Until now, IBDs have had to choose between hiring less experienced in-house compliance staffers or delegating branch inspections to OSJ managers,” he says.

That choice raises potential conflicts of interest, he asserts, because OSJ managers’ compensation is tied to the financial performance of the office they are auditing for potential supervisory problems.

“Both choices drive an accelerated level of regulatory and compliance risk to the IBD, the branch office, the financial advisors and ultimately the investing public,” Ressler says.

Essential Edge offers a solution to that conflict of interest, offering compliance experts for hire with a flat fee to cover each step of the branch inspection process.

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