Month: August 2022

Firm WSPs Have Been Updated!

August 3, 2022

ESI Written Supervisory Procedures Update

ESI continually reviews its Written Supervisory Procedures (“WSP”) in accordance with regulatory and business requirements.  Effective June 30, 2022, ESI’s WSP manual has been updated to incorporate various changes.  Among others, the substantive changes are summarized below. 

Summary of changes

#TitleUpdate
2.3Outside Business ActivitiesAdded a prohibition for selling or soliciting digital assets (including but not limited to cryptocurrencies, digital tokens, digital currencies, virtual assets, and initial coin offerings, and digital asset consulting/education services).
3.2.11Maintaining Terminated Persons’ RegistrationAdded to reflect FINRA allowing individuals who terminate their registration to maintain their qualifications for five years following termination under certain conditions per amendments made to FINRA Rule 1240.
5.2.2.1Doing Business As (DBAs) NamesAdded clarification around DBAs. RRs may not use DBA names on customer communications except when: Clear and prominent identification of the Firm as the entity through which securities are offeredDBA name has been reviewed and approved by AGT and Compliance and required disclosures are madeClear explanation of the DBA and its relationship with the FirmCommunications are subject to review including content and disclosuresDBAs for insurance activities may not imply that securities, advisory services or financial planning services are offered through the DBA entity.
5.12Electronic Communications PolicySection 2.18 has been removed and combined with Section 5.12: Electronic Communication Policy so that the policies and the procedures are together in the same section.
9.7Anti-Money LaunderingSection 2.15 has been removed and combined with Section 9.7: Anti-Money Laundering so that the policies and the procedures are together in the same section.
10.8.7Financial Exploitation – Temporary HoldsAdded an additional 30 days that a temporary hold may be placed when there is a reasonable belief of financial exploitation per amendments made to FINRA Rule 2165.
19.3.1CorrespondenceAdded that municipal securities correspondence require review by a municipal securities principal. If a municipal securities supervisor is not available in the field office, the correspondence must be submitted ESI. A home office municipal securities principal will review and return to be retained in the Correspondence File. This was previously communicated under Field Notice 2019-06.

Location of manual

Please review the updated ESI’s Written Supervisory Procedures for details of the changes outlined in this notice. The manual may also be found on the NLG Website, under “Compliance” à “ESI Compliance” à “Overview” à “ESI Written Supervisory Procedures”.

QUESTIONS

If you have any questions regarding this notice, please feel free to contact ESI Compliance at 800-344-7437.

EFA Written Supervisory Procedures Update

ESI Financial Advisors (“EFA”) continually reviews its Written Supervisory Procedures (“WSP”) in accordance with the regulatory and business requirements.  Effective June 30, 2022, ESI’s WSP manual has been updated to incorporate various changes.  Among others, the substantive changes are summarized below. 

Summary of changes

#TitleUpdate
19.5Investment Adviser Representative Continuing EducationAdded the requirement for IARs to complete continuing education annually in certain states. For more details, please review Field Notice 2022-08. 
19.6Outside Business ActivitiesAdded a prohibition for selling or soliciting digital assets (including but not limited to cryptocurrencies, digital tokens, digital currencies, virtual assets, and initial coin offerings, and digital asset consulting/ education services).
19.7Borrowing From And Lending To CustomersAdded details to the prohibition of IARs borrowing from or lending to customers to align with the ESI WSPs.
23.6Accounts for Marijuana-Related Businesses and Associated IndividualsAdded that the Firm does not allow opening accounts for marijuana businesses or customer who derive their income from marijuana businesses to align with the ESI WSPs.  
37.4.3.2Temporary HoldsAdded an additional 30 days that a temporary hold may be placed when there is a reasonable belief of financial exploitation to align with the ESI WSPs.  

Location of manual

Please review the updated EFA’s Written Supervisory Procedures for details of the changes outlined in this notice. The manual may also be found on the NLG Website, under “Compliance” à “ESI Compliance” à “Overview” à “EFA Written Supervisory Procedures”.

QUESTIONS

If you have any questions regarding this notice, please feel free to contact ESI Compliance at 800-344-7437.

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Reminders: Alternative Mutual Funds & Google Chromebooks with Entreda

August 3, 2022

Approved and Prohibited Alternative Mutual Funds

The purchase of Alternative Mutual Funds that include inverse and leveraged strategies is not permitted. To assist with what funds may be purchased, there is an Alternative Mutual Fund Available List and a Watch List which is updated quarterly and may be found on the Agent Portal à Products à Investments à Mutual Funds. 

  • The Approved List is a list of approved alternative mutual funds that may be purchased (once training has been completed).
  • The Watch List is a the list of alternative mutual funds that the Firm is watching to determine if they may become prohibited in the future due to failing consecutive screens, (two consecutive quarters). If you recommend purchases on the list, please be aware that they may no longer be approved to purchase in the future.
  • The Restricted List is the list of prohibited alternative mutual funds.
    • BROKERAGE: If an attempt to purchase is ma de in a brokerage account, the purchase will be blocked.
    • DIRECT: If purchased in a direct, mutual fund, you will be contacted by Compliance after to work with your client to have any new investments directed to a non-alternative mutual fund or to one of the approved alternative mutual funds. 
    • REMOVED FROM APPROVED LIST:If a fund is removed from the Available list (brokerage or direct), Compliance will contact you to let you know that the fund is no longer available for purchase and to work with your client to have any new investments directed to a non-alternative mutual fund or to one of the approved alternative mutual funds. 

Training

Prior to purchasing approved alternative mutual funds, you must first complete required training in FIRE Solutions. The training may be accessed through FIRE Solutions: https://blaze.firesolutions.com/portal/login. The cost is $12.50.  Once you have completed the course, please email your completion certificate to ESITrading@NationalLife.com and this training will be added to your profile.

Questions

If you have any questions or concerns regarding the alternative mutual fund lists, please contact ESI at 800-344-7437.

Entreda Does not Support Google Chromebooks

With the launch of the Entreda Cybersecurity platform last year, National Life took a big step forward in keeping our promise to protect you and your client’s sensitive information. We’ve seen some stellar Entreda scores for both Mac and Windows machines and are excited to see so many of you taking the correct steps to keep that sensitive information secure.  

Protecting your client’s information is an ongoing process and we must continually evolve with the ever-changing landscape. Currently, the Entreda platform does not support Google Chromebooks. Chromebooks are popular in schools as they rely on an internet connection, are inexpensive and are easy to use devices.   However, because they have not evolved into the business world yet National Life has made the decision to restrict Chromebooks from accessing the agent portal for those covered by Entreda. Fortunately, this represents a very small percentage of agent portal logins. This restriction will take place on August 1st 2022. After that time, you will need to use a Windows or Mac computer to access the agent portal. Android devices will continue to be supported and won’t be affected by this decision.

We are working with Entreda to provide coverage for Chromebooks in the future so that we can support a wide variety of devices as securely as possible.

Thank you for your understanding and helping us keep our promise to you and your clients.

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Envestnet PMC: Quarterly Commentary for Flagship Program

August 3, 2022

Volatility reigned supreme in the second quarter, putting investors’ fortitude to a test. Stubbornly high inflation, sharp increases in interest rates, rising recession risks, ongoing geopolitical unrest, and a massive COVID-related lockdown in China pressured equities and other assets. The sharp drop in China’s economic activity not only increased the chances of a global recession, but also compounded global supply chain problems. The May Consumer Price Index (CPI) report showed inflation had not yet peaked, as the CPI rose 8.6% year-over-year, the highest reading since 1982. In response to the recent high readings, the Federal Reserve (Fed) increased interest rates twice in the quarter, for a total of 125 basis points, to a level of 1.50%-1.75%. Sticky inflation combined with the greater-than-expected rate increases sent equities into a spin, with the S&P 500 Index experiencing its worst first half of the year in decades. International equities showed more resiliency than domestic stocks, with emerging and international developed markets dropping less than US equities. Large caps fared slightly better than small caps, whereas value stocks handily outpaced growth. Despite commodities registering negative returns in the second quarter, mostly as a result of steep declines in late June, they outperformed equities by a wide margin. Within fixed income markets, most bond indices registered solidly negative returns, as still-high inflation and the prospect of faster-than-expected rate increases from the Fed weighed on most fixed income sectors. In response to a hawkish Fed and elevated CPI readings, Treasury yields surged to levels last seen more than a decade ago, with the yield on the 2-year U.S. Treasury Note ending the quarter six basis points lower than the 10-year’s 2.98% yield. The yield curve flattened as a result, with investors worrying that the sharp increase in rates may hamper economic growth. Domestic bonds significantly outperformed their global counterparts. Long duration bonds trailed shorter duration issues, and investment grade outperformed lower-quality, higher-yielding bonds. Municipals performed better than taxable bonds, thanks in part to a positive technical and fundamental backdrop. Our portfolios posted negative absolute returns for the quarter, with the more aggressive allocations trailing relative to the more conservative strategies.

CLICK HERE TO READ FULL COMMENTARY FROM PMC ENVESTNET

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