All Field Notices can be viewed on the agent portal! Simply log in, click on “Training” and then “Compliance”:

From there, you’ll select “ESI Compliance” followed by “Overview” in the left-hand menu:

You’ll then see under “ESI Policies and Procedures” listed in the main, “Overview,” screen and one of the options to select is “ESI Field Notices”:

From there you can view all of ESI’s 2023 Field Notices as well as an archive of Field Notices dating back to 2010!

Questions? Give ESI Compliance a ring at 1-800-344-7437.

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Cybersecurity is the practice of protecting networks, systems, hardware and data from digital attacks. It encompasses everything pertaining to protecting sensitive data – personally identifiable information (“PII”), protected health information (“PHI”), personal information, intellectual property, data, and industry information systems – from theft and damage attempted by criminals and adversaries.

This Field Notice outlines some important best practices around ESI’s cybersecurity requirements. For more best practices and guidance, please review Field Notice 2021-09 Cybersecurity and ESI’s Written Supervisory Procedures.

**Having trouble with the links in this email? Log into the agent portal first, and try again!**

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Branch Cybersecurity Policy

It is recommended that each branch have a documented cybersecurity policy. Here are some items to consider including in the policy:

What to do if there is a cybersecurity-related issue

To report an incident, please contact your supervisor. In coordination with your supervisor, please contact ESI Compliance (esicompliance@nationallife.com) to report. Cybersecurity-related issues may include, but are not limited to:

• email hacking
• password compromise
• computer hacking
• computer/device theft or loss
• Other situations, whether caused by humans or technology, that resulted or could result, in the exposure of confidential information to unauthorized parties

Vetting third party IT providers or resources

The ESI Confidentiality Agreement is required whenever a third-party or outside service provider may have access to ESI’s confidential client information or records. Examples of third-party services may include, but are not limited to, shredding services, document storage facilities, office cleaning services, or IT service providers.

When using outside third-party IT resources, in addition to obtaining a confidentiality agreement, the vendor should be adequately assessed to ensure that they have effective security practices.

Inventory of Assets

It is recommended that you create and maintain a technology inventory. This should include computers, laptops, scanners, tablets, phones, printers, etc. In case an issue arises, this inventory will help you understand what asset has gone missing or has been impacted and who it belonged to.

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Important Reminders

Below is a list of important reminders around security and protection of information:

• Scanners must be linked to an NLG email: When scanning documents, the scanner must be linked to an NLG email address for the security of the information being scanned. When utilizing a phone or other device to scan or take a photo of documents, such devices must be encrypted and linked to an NLG email address. Outside email addresses may not be encrypted or as secure as your NLG email. 
• Sharing of passwords is prohibited: Passwords may not be shared for any reason. This includes providing an NRF passwords for an RR’s computer, email, or online system to access client information.
• Accessing client accounts is prohibited: RRs and NRFs are not permitted to obtain passwords from a client to access a client’s account information or other PII (even with the client’s permission). Only clients may access their own accounts.
• Email encryption: National Life encrypts email for all outgoing electronic mail that contains PII: ABA routing numbers, credit card numbers, social security numbers, federal tax IDs, and policy numbers. When sending a message with sensitive information, you must use your National Life email account and type “[PRIVATE]” in the subject line to enable the encryption of the message.
• Phishing emails: Be mindful of suspicious email from unknown senders. Such email may have spelling or grammatical errors or create a sense of urgency. Additionally, never open an email attachment unless it comes from a trusted source. Home office employees may report potential phishing email by clicking the “Phish Alert Report” button within Outlook. Field representatives may forward the email as an attachment to spam@nationallife.com.

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Anti-Virus And Encryption

Everyone associated with ESI must have anti-virus software on all computers that access or store clients’ PII. In addition, all portable devices and external media (e.g. zip drive, flash drive, mobile phone, laptop, disks) that access or store clients’ PII must be encrypted. Backup drives should be encrypted to prevent unauthorized access in the event they are stolen or lost.

Anti-virus/anti-malware software vendors that are compliant with Entreda: 

AVAST! Software	ESET	Symantec Corp.
AVG Technologies	Kaspersky	Norton360
BitDefender	Malwarebytes Premium	Sophos
Checkpoint	McAfee	Trend Micro
Crowdstrike Falcon	Windows Defender	Vipre Anti-Virus
Fortinet	Panda Security	Webroot
Cylance Protect	SentinelOne	Zone Alarm

                      Encryption vendors that are compliant with Entreda:

• Microsoft BitLocker Encryption
• McAfee
• Sophos
• Symantec (full disk encryption only)

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Entreda

Everyone is required to have the Entreda Unify System (“Entreda”) software installed on all computers and laptops that access or store clients’ PII or are used to access the agent portal. Entreda monitors the security of the computer system, including any key security control deficiencies status deficiencies.

Once installed, Entreda calculates a security risk score based on certain criteria including auto-screen lock, WiFi, password, and encryption settings, among other factors. A device must maintain a passing score of 660 or above to be compliant. Failure to install Entreda or maintain a passing score of 660 will prevent users from accessing the agent portal. Please refer to FN 2021-19 Entreda Unify Systems for more details.

If you no longer utilize a device for business purposes, all ESI data must be permanently removed from that device. Once removed, please contact Rich Whalen (rwhalen@nationallife.com) to confirm and allow him to remove the device from Entreda reporting.

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Questions

If you have any cybersecurity-related questions, please contact your supervisor.  

**Having trouble with the links in this email? Log into the agent portal first, and try again!**

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TC130210(1222)1

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Cybersecurity
Cybersecurity is the practice of protecting networks, systems, hardware and data from digital attacks. It encompasses everything pertaining to protecting sensitive data – personally identifiable information (“PII”), protected health information (“PHI”), personal information, intellectual property, data, and industry information systems – from theft and damage attempted by criminals and adversaries.

This Field Notice outlines some important best practices around ESI’s cybersecurity requirements. For more best practices and guidance, please review Field Notice 2021-09 Cybersecurity and ESI’s Written Supervisory Procedures.

Branch Cybersecurity Policy
It is recommended that each branch have a documented cybersecurity policy. Here are some items to consider including in the policy:

1. What to do if there is a cybersecurity-related issue
   To report an incident, please contact your supervisor. In coordination with your supervisor, please contact ESI Compliance (esicompliance@nationallife.com) to report. Cybersecurity-related issues may include, but are not limited to:
   • email hacking
   • password compromise
   • computer hacking
   • computer/device theft or loss
   • Other situations, whether caused by humans or technology, that resulted or could result, in the exposure of confidential information to unauthorized parties 
2. Vetting third party IT providers or resources
   The ESI Confidentiality Agreement is required whenever a third-party or outside service provider may have access to ESI’s confidential client information or records. Examples of third-party services may include, but are not limited to, shredding services, document storage facilities, office cleaning services, or IT service providers.
   When using outside third-party IT resources, in addition to obtaining a confidentiality agreement, the vendor should be adequately assessed to ensure that they have effective security practices.
3. Inventory of Assets
   It is recommended that you create and maintain a technology inventory. This should include computers, laptops, scanners, tablets, phones, printers, etc. In case an issue arises, this inventory will help you understand what asset has gone missing or has been impacted and who it belonged to.

Important Reminders
Below is a list of important reminders around security and protection of information:

• Scanners must be linked to an NLG email: When scanning documents, the scanner must be linked to an NLG email address for the security of the information being scanned. When utilizing a phone or other device to scan or take a photo of documents, such devices must be encrypted and linked to an NLG email address. Outside email addresses may not be encrypted or as secure as your NLG email. 
• Sharing of passwords is prohibited: Passwords may not be shared for any reason. This includes providing an NRF passwords for an RR’s computer, email, or online system to access client information.
• Accessing client accounts is prohibited: RRs and NRFs are not permitted to obtain passwords from a client to access a client’s account information or other PII (even with the client’s permission). Only clients may access their own accounts.
• Email encryption: National Life encrypts email for all outgoing electronic mail that contains PII: ABA routing numbers, credit card numbers, social security numbers, federal tax IDs, and policy numbers. When sending a message with sensitive information, you must use your National Life email account and type “[PRIVATE]” in the subject line to enable the encryption of the message.
• Phishing emails: Be mindful of suspicious email from unknown senders. Such email may have spelling or grammatical errors or create a sense of urgency. Additionally, never open an email attachment unless it comes from a trusted source. Home office employees may report potential phishing email by clicking the “Phish Alert Report” button within Outlook. Field representatives may forward the email as an attachment to spam@nationallife.com.

Anti-Virus and Encryption
Everyone associated with ESI must have anti-virus software on all computers that access or store clients’ PII. In addition, all portable devices and external media (e.g. zip drive, flash drive, mobile phone, laptop, disks) that access or store clients’ PII must be encrypted. Backup drives should be encrypted to prevent unauthorized access in the event they are stolen or lost.

Anti-virus/anti-malware software vendors that are compliant with Entreda: 

• AVAST! Software    
• AVG Technologies
• BitDefender 
• Checkpoint
• Crowdstrike Falcon
• Fortinet
• Cylance Protect
• ESET
• Kaspersky
• Malwarebytes Premium
• McAfee
• Windows Defender
• Panda Security
• SentinelOne
• Symantec Corp.
• Norton360
• Sophos
• Trend Micro
• Vipre Anti-Virus
• Webroot
• Zone Alarm

Encryption vendors that are compliant with Entreda:

• Microsoft BitLocker Encryption
• McAfee
• Sophos
• Symantec (full disk encryption only)

Entreda
Everyone is required to have the Entreda Unify System (“Entreda”) software installed on all computers and laptops that access or store clients’ PII or are used to access the agent portal. Entreda monitors the security of the computer system, including any key security control deficiencies status deficiencies.

Once installed, Entreda calculates a security risk score based on certain criteria including auto-screen lock, WiFi, password, and encryption settings, among other factors. A device must maintain a passing score of 660 or above to be compliant. Failure to install Entreda or maintain a passing score of 660 will prevent users from accessing the agent portal. Please refer to FN 2021-19 Entreda Unify Systems for more details.

If you no longer utilize a device for business purposes, all ESI data must be permanently removed from that device. Once removed, please contact Rich Whalen (rwhalen@nationallife.com) to confirm and allow him to remove the device from Entreda reporting.

Questions
If you have any cybersecurity-related questions, please contact your supervisor. 

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Private Placement Offerings
Equity Services, Inc. (“ESI”) permits its Registered Representatives and Investment Adviser Representatives (collectively “Representatives) to invest in private placement offerings for their own accounts.  However, ESI’s Code of Ethics requires that all RRs and IARs obtain approval BEFORE investing in a private placement offering. This notice is a reminder of ESI’s process for the review and approval of private placement offerings.

Procedure
Requests for review of a private placement offering should be emailed to the ESI Compliance team at ESICompliance@nationallife.com. With the initial request, include a copy of the offering statement and/or subscription agreement and any other collateral materials you have which describe the program.

Once the necessary information has been received, ESI will complete its review and approve or deny the request. If approved, the Representative will receive an Approval and Stipulation Letter (along with instructions on how to confirm the transaction in Star Compliance) which they must sign and return to Compliance before investing. The letter enumerates the conditions under which they may participate in the offering (see “Stipulations” below).  If denied, the Representative will be notified of the reason for the denial in writing.

You may not invest any capital in a private placement offering prior to receiving approval from ESI. To do so is a violation of ESI’s Code of Ethics and could subject you to disciplinary action. Once you are approved to participate in a program, future additional investments in the same program do not require pre-approval but must be entered into Star Compliance for review by Compliance and for quarterly and annual reporting.

IAR Quarterly Reporting
For IARs, private placements are reportable on the Quarterly Transaction Report covering the quarter in which the transaction occurred, as well as on the Annual Holdings Report, for as long as the holding is maintained.

If the request is approved, the initial transaction and holdings information will automatically populate the quarterly and annual reports, as appropriate.  NOTE:  Private placements are not included on any brokerage firm data feed.  Consequently, any subsequent transactions (buy/sell) in the holding must be manually entered into Star Compliance via the “Private Transactions” tile.

Stipulations
The list below represents the standard stipulations that accompany approval to participate in a private placement offering.  The Firm reserves the right to add any additional stipulations, as warranted.

• Your insurance and investment businesses are separate and not connected to the investment.
• ESI understands that you are not aware of any current ESI clients who are investors in the private investment.
• To the extent any clients may be investors in the proposed private placement, you represent that you have had no involvement with their decision to invest.
• The private placement offering should not be offered by you or your spouse to any clients, potential clients, or affiliated representatives of ESI or National Life.
• You will not refer anyone to the proposed private placement to participate in the investments.
• The private placement offering should not be discussed with ESI or National Life representatives and/or agents.
• The approval to invest should, in no way, be considered an endorsement of the offering. ESI does not review or approve the merits of private placement offerings. 
• The transaction must be disclosed on your Quarterly Transaction Report for the quarter in which the transaction is executed, and on your annual personal securities holding report for as long as you hold the security.
• You represent that you are a passive investor in the private placement and have or will have no role in running the business.
• You acknowledge your understanding that additional investments in a private placement requires prior review and approval by ESI.

Clients’ Investments in Private Placements
Currently, ESI does not offer private placements. As such, Registered Representatives and Investment Adviser Representatives are prohibited from offering, recommending, evaluating, or in any way facilitating a client to invest in a placement offering. A Representative who facilitates an investment in, or refers a prospect to, a private placement offeror is considered to have engaged in an unapproved private securities transaction, or “selling away”. This includes even just introducing a potential investor to an underwriter or offeror for a private placement. Selling away is a serious FINRA rule violation, and often results in significant regulatory sanctions.

Questions
If you have any questions about this requirement, please contact ESI Compliance, at 800-344-7437.

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Both the 2022 Annual Compliance Meeting (“ACM”) and the 2022-2023 Firm Element continuing education (“CE”) program are available in RegEd for all Registered Representatives (“RRs”). This field notice explains these requirements and how to access them. 

Please note the due dates for completing the ACM and CE, as they are different:

• Annual Compliance Meeting: complete by December 31, 2022
• Firm Element CE: complete by February 28, 2023

2022 ANNUAL COMPLIANCE MEETING

Login to RegEd (see below for instructions). Under the “My Requirements” section, find “Equity Services Inc. 2022 Annual Compliance Meeting”.

Click on the course to open the meeting in a new window. Ensure the volume on your device is working, as you must be able to hear the audio. As a reminder: ensure you complete the acknowledgement at the end of the presentation in order to receive credit for the meeting. If you don’t complete the acknowledgement, the system will not record your session as complete.

FIRM ELEMENT CE COURSE ASSIGNMENTS

All registered persons will complete the following courses:

Diminished Capacity: Recognizing and Responding to the Signs: As the number of Boomers in retirement grows exponentially, financial services firms increasingly struggle with issues relating to the elderly, including accommodating normal aging, identifying diminished cognitive and financial capacity, and recognizing and reporting elder abuse. Documenting suitable recommendations and rationale and a strict adherence to firm and regulatory requirements will allow you to serve your aging clients both sensitively and faithfully. 

Switching, Second Edition (821_2): While switching itself is not illegal, if not done in the best interest of the client, it is both unethical and illegal. This course explains and discusses switching and its impact on customer accounts, suitability, record-keeping and reporting rules, and reviews some FINRA actions demonstrating how switching violation is disciplined.

Suitability of Variable Products (930): This course discusses the nature, benefits and risks of variable universal life insurance and variable annuities and focuses on suitability concerns involving these products. It also explains the SEC’s Regulation Best Interest, which imposes a higher standard of conduct when making recommendations to retail customers.

AML Annual Update: 2022 (35AU22): AML – The Anti-Money Laundering Annual Update: 2022 reviews FinCEN’s accomplishments during 2021 relating to its requirements under the AML Act of 2020. It discusses important FINRA enforcement cases against individuals and firms, emphasizing the conduct FINRA considers to violate AML rules.

FINRA: Ethical Considerations for Registered Representatives (EL_ELC170): This course presents six common ethical principles and selected decision-making models for registered representatives to consider when facing ethical dilemmas. Scenarios demonstrate how these models can be practically applied to common ethical challenges faced by securities professionals.

SINGLE SIGN-ON (SSO) WITH REGED

Use your NLG login credentials to access your agent portal. From the home page, click on “Training”. Under “Continuing Education”, find and click “RegEd Courses”.

This will bring you to your RegEd dashboard. From there you can launch your Firm Element courses.

If, for some reason, you have a problem with SSO, you can still access your courses directly through RegEd’s website:

• Go to www.reged.com:
  • Look for a welcome email from RegEd
  • Click “Secure Login” à “RegEd Compliance Management”
  • At the login screen:
    • Username: your ESI rep code (included in your welcome message from RegEd)
    • Password: “Welcome#2022” (you will be prompted to change this upon login)
    • Company code: EQUITYSI

• If you did not receive an email with your username, click “Username” on the login screen:

Provide your NLG email address and click “Submit”. You will receive an email with your username.

TECHNICAL SUPPORT

RegEd customer support is available Monday-Friday, 8:00am to 8:00pm EST. Technical questions with the RegEd website can be directed to RegEd Customer Service at 800-334.8322 or info@reged.com.  RegEd’s Web Chat feature is available at www.reged.com/contactus.

FREQUENTLY ASKED QUESTIONS

How long do I have to complete the Annual Compliance Meeting?

The Annual Compliance Meeting must be completed by 12/31/2022.

How long do I have to complete the Firm Element courses?

The Firm Element courses must be completed by 2/28/2023.

What if I miss the due date?

A RR who has not completed the Annual Compliance Meeting by 12/31/2022 or the Firm Element courses by 2/28/2023 may be subject to disciplinary action.

How do I pay for my courses through RegEd?

The cost of the Firm Element courses is covered in the ESI affiliation fee. You will not have to pay separately for your Firm Element courses.

Am I required to complete the Firm Element courses?

Covered Persons, as defined under FINRA Rule 1240(b)(1), are subject to the Firm Element CE program. At ESI, Covered Persons include all RRs in the field, and home office personnel working within ESI (registered and non-registered), and certain National Life employees registered as Operations Professionals.

Do I have to complete the Firm Element courses if I join ESI mid-year?

RRs whose ESI affiliation is active prior to 7/1/2022 must complete the program. Those whose ESI affiliation is active on or after 7/1/2022 are exempt from the current year’s Firm Element CE program

What if I recently completed FINRA’s Regulatory CE Session?

Regulatory Element training is an online exam administered by FINRA and must be completed on an annual basis. Firm Element training is an annual requirement administered by the broker-dealer and must be completed in addition to the Regulatory Element. Both are required elements of FINRA’s overall CE requirement.

Can I obtain insurance CE credit through RegEd?

Yes, your access to RegEd gives you the ability to order additional courses from their catalog of insurance CE courses, as well. You will be responsible for the cost of courses purchased to fulfill insurance CE requirements, and RegEd will bill you directly. Additional fees for CE credits may vary depending on the state(s) requested.

What if I am having system issues?

For technical assistance with the RegEd website or questions on insurance CE credit, RegEd customer support is available Monday-Friday, 8:00am to 8:00pm EST. Technical questions with the RegEd website can be directed to RegEd Customer Service at 800-334.8322 or info@reged.com.  RegEd’s Web Chat feature is available at www.reged.com/contactus.

Will my courses through RegEd fulfill certain National Life requirements?

No, National Life maintains a separate AML requirement, apart from ESI’s Firm Element curriculum.  Your National Life Annual E&O update and AML renewal can be easily updated in one system. Please contact National Life’s Compliance group for information on taking the 2-year AML renewal for National Life.

Additional Questions? Please feel free to contact Christine Embling at cembling@nationallife.com.      

CLICK HERE TO VIEW FIELD NOTICE 2022-26 IN FULL

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Equity Services Inc. (“ESI”) may not retain custody of client assets, including security/stock certificates and funds, or serve in any capacity that gives ESI and/or its representatives legal ownership, control of, or access to client funds or securities.  

Custody Defined

RRs/IARs who have custody or possession of client securities or funds are subject to extensive regulation pursuant to SEA Rule 240.15c3-3(k)(2)(ii) for broker dealers and Rule 206(4)-2 under the Investment Advisers Act of 1940 for investment advisers. These rules define custody as “holding, directly or indirectly, client funds or securities, or having any authority to obtain possession of them.”

ESI is exempt from these rules as long as ESI does not maintain custody of client funds or securities. This requires that ESI clear all transactions with and for customers with a clearing firm and promptly transmit all customer funds and securities.

Examples

Examples of what constitutes custody include:

1. Possession of client funds or securities held beyond noon the next business day. Examples include:
2. Bond or stock certificates,
3. Checks received with a new account or transfer of funds, or
4. Checks received for a subsequent investment.
5. Any arrangement which authorizes or permits an RR/IAR to withdraw client funds or securities (e.g. a general power of attorney or signatory power over a client’s account, direct debiting of advisory fees, etc.)[1].
6. Any capacity (e.g. general partner of a limited partnership, trustee of a client’s trust, etc.) that gives an RR/IAR or a supervised person legal ownership or access to client funds or securities[2].
7. Having access to a customer’s bank account or the login info for their banking website.

Prompt Processing

Checks and transaction paperwork must be processed according to prompt processing requirements which means:

• Checks (new business and additional investments), and the paperwork accompanying checks, must be forwarded by noon the next business day after receipt,
• Transaction paperwork without checks must be forwarded within 2 business days after receipt, and
• For annuity paperwork, with or without checks, the Main OSJ has 7 business days from the Field OSJs date of receipt of the application to review and forward the application to the carrier. Field OSJs must promptly complete their review and forward annuity paperwork to the Main OSJ to allow time for the Main OSJ’s review and approval process.

To help ensure business is processed promptly:

• Have paperwork completed and signed electronically in Docupace to avoid delays between getting paperwork signed and putting it in Docupace.
• Promptly put manual paperwork into Docupace.
• Use Mobile Check Deposit when possible.
• Remember that additional investment checks do not require approval. Send additional investment checks to the product offeror concurrently with putting a copy in Docupace.

Handling inadvertent receipt of assets:

In the event that you inadvertently receive funds or security certificates from a client or have to return funds or securities to a client:

1. Promptly record receipt on the Checks Received/Transaction Blotter.
2. Scan into Docupace using “ESI Inadvertent Receipt”. Items to be scanned should include copies of the following, as applicable:  
   1. Item(s) received (stock certificate(s) or check),
   1. Correspondence returning item to client,
   1. Overnight package receipt with tracking number to ensure delivery.
3. Reject the item(s) in Docupace (submitter rejects).
4. Return to the client in-person or by overnight mail by noon of the next business day.

What to do if a check or security is accidently held?

If for any reason, a check or security is held beyond noon the next business day, please notify your supervisor, who will then advise ESI Compliance. We are required to report these instances annually to the SEC.

Questions:

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

CLICK HERE TO VIEW FIELD NOTICE 2022-28 IN FULL

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[1] Exceptions may be granted in situations involving family members (“family member” is a defined term in section 2.5.5 of the ESI Written Supervisory Procedures) but must be reviewed and approved by Compliance prior to establishing the relationship.

[2] Same exception as noted in footnote 1.

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The securities industry has recently seen some SEC enforcement cases which involved multi-million-dollar fines related to the failure of certain firms to capture all electronic communications.  Firms’ processes and representatives’ compliance in this area are sure to receive continued scrutiny from regulators. To ensure that ESI’s representatives are compliant and still able to market non-securities related services under an approved DBA, this notice reiterates the process for all outside business-related email accounts, as well as non-standard NLG email formats. All ESI Registered Representatives (“RRs”), Investment Adviser Representatives (“IARs”), employees, and associated persons (including non-registered fingerprinted administrative staff) are required to use an NLGroup email or a firm-approved non-standard (a.k.a. “vanity”) email address for all business-related communications. Using an unapproved outside email address could cause violations of securities laws and could result in disciplinary action to the representative.

What is a Business-Related Communication?
Definition: Business-related communications include anything relating to:

• Securities
• Investment advisory services
• Insurance (i.e. life, annuities, disability, property/casualty, health, group, etc.)
• Commodities
• Real Estate
• All investment-related activities as defined by FINRA

Business-related communications to clients, potential clients, vendors, home office employees, admin staff, or other RRs may not be sent using an unapproved outside email address.

Examples of business-related communications include, but are not limited to:

• Communicating to/from or about clients,
• Discussing appointments with a client or RR (even to say you are running late),
• Sending a form (even to print it),
• Submitting a blotter to your Field OSJ,
• Asking/answering questions to your office staff,
• Discussing anything about the Firm or the Firm’s business, or
• Communicating with vendors (i.e. wholesalers and marketing organizations).

Scanners
If you scan documents that are linked to an email, ensure the email address is your NLG email. Scanners must be linked to an NLG email address for the security of the information being scanned. Additionally, if you utilize your phone to take a photo for business purposes (e.g. photograph a driver’s license or paperwork), ensure that you upload them only to an approved email account and not your personal email.  Keep in mind that these documents may have confidential, personally identifiable information and should not be stored on your phone or in the cloud. So, you will want to ensure such items are properly deleted from the device immediately.

CPA, Enrolled Agent, or Attorney Emails
RRs who are also CPAs, Enrolled Agents (“EAs”), or attorneys must use their NLGroup email for all financial services business-related communications. However, ESI recognizes that CPAs, EAs and attorneys have privacy concerns specific to these outside activities.  Accordingly, those RRs who are practicing CPAs, EAs, or attorneys (or NY-only tax preparers) may use an outside email address for their accounting/tax or legal activities. To do so, RRs must maintain clear separation between their financial services and accounting/tax or legal activities, and submit a completed Email Address Certification to their supervisor and ESI Compliance.  

RRs must allow inspection of the outside email if requested and agree to all other terms specified in the Certification, which include minimum retention requirements. 

Vanity or Non-Standard Email
RRs and associated persons may be permitted to use a personalized or vanity email address (e.g. jsmith@abcfinancial.com) or a non-standard National Life format (i.e. something other than the standard LastName_FirstName@nlgroupmail.com  configuration) for business-related emails, provided that prior approval is obtained from ESI, and that such email addresses are properly configured to flow through the National Life servers.

It is important to note that the use of web-based email such as “Yahoo”, “AOL”, “Gmail”, or like services will not be approved, and are not permitted for financial services business-related communications under any circumstances, because they do not meet the regulatory requirements for monitoring and retention.

For more information on vanity or non-standard email addresses, please review Field Notice 2022-23 Vanity and Non-Standard Email.     

Questions?
If you have any questions, please feel free to contact ESI Compliance at 800-344-7437 or ESIElectroniccommunications@nationallife.com.

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Compliance with the Securities Exchange Commission’s (“SEC”) new Marketing Rule (“Rule”) will be required on November 4, 2022.  Below are some highlights of what to know about the Rule, and how these changes affect you.  Please note that the changes to EFA’s policies and procedures discussed below are not in effect, yet, but will be effective prior to the November 4^th deadline.

THE “OLD” RULES

Current SEC Rules[1] consider it to be a violation for any Investment Adviser to publish a “testimonial” concerning the adviser’s advice, analysis or other services.  This means that, today, ESI Financial Advisors (“EFA”) and its Investment Adviser Representatives (“IARs”) cannot publish advertisements, on social media or otherwise, with statements such as:

• “Hello, I’m John Smith, public school teacher.  I’ve worked with Mary Shields at EFA for forty years.  She’s always been there for me, and she’s helped me to plan for a more comfortable retirement.  You should call her. She can probably help you, too.”

• “I’m star quarterback Max Power, and I love my Advisor at EFA, Reed Rothchild.  Don’t drop the ball! Call them today and open up an account!”

Notwithstanding this ban on testimonials, referrals of a specific client to an IAR or advisor are generally permitted if the solicitation rules are complied with.[2]  Specifically, an Advisor is permitted to pay a cash fee to a solicitor who refers business to them, as long as there is a written agreement with the solicitor and the advisor, the solicitor distributed the advisor’s ADV, and the solicitor provided their own disclosure document (which discussed, among other things, the solicitor’s compensation).[3] 

Additionally, as long as the person making the referral did not base it on an individual’s specific investment needs, impersonal referral arrangements are generally not considered to be solicitations by the SEC, and are permitted without complying with the solicitation rules and their disclosure requirements.[4]  As a result, people like Dave Ramsey are allowed to have a network of “Endorsed Local Providers” that they refer business to, and you yourself may have similar informal networking arrangements.   For example, you may agree with a CPA to send clients to him or her, if the CPA agrees to send clients your way.

THE NEW RULES

In December 2020, the SEC approved amendments to Rule 206(4)-1, which combines new regulatory approaches to advertisements and solicitations. These changes take effect November 4, 2022.

Promoters: The new rules introduce the concept of a “Promoter,” which is a person or company that provides “testimonials” or “endorsements,” whether or not they receive compensation.  “Testimonials” are statements by clients of the adviser that solicit others to become clients.  “Endorsements” are the same types of statements but are made by non-clients. Promoters that provide testimonials or endorsements include:

• Subscription-based referral services – websites or other entities that pair potential investors with local advisors (such as SmartAsset, Ramsey Solutions, or WiserAdviser, for example) to which the advisor pays a fee for the service;
• Referral arrangements with other professionals – such as attorneys, CPAs, insurance agents, etc. – that involve cash or non-cash compensation;
• Traditional solicitation agreements with other professionals that actively solicit advisory business on your behalf; and
• Any other relationship or arrangement that results in the referral of potential investors for advisory-related services.

If you use promoters and enter into arrangements to generate referrals to you, you will need to comply with ESI’s new requirements, described below. 

Contract Requirement (Promoter Agreement): EFA is required to have an agreement in place with all Promoters if the amount of compensation (whether cash or non-cash compensation) is more than $1,000.  Because it will be unclear whether the value of non-cash arrangements exceed this amount, EFA will require that an agreement be in place for all arrangements using promoters.

Disclosure Requirement: This agreement will require the use of a disclosure form, which will meet the rule’s disclosure requirements.  These disclosure requirements include, but are not limited to:

• Whether the Promoter is a current client of the adviser;
• Whether cash or non-cash compensation is provided for the testimonial, endorsement, or solicitation;
• A brief statement of any material conflicts of interest on the part of the Promoter that results from their relationship with the adviser; and
• The material terms of any compensation arrangement, including a description of the compensation provided or to be provided, directly or indirectly, to the person for the testimonial or endorsement.

For IARs with existing referral relationships, such as informal networking agreements and cross-referral agreements with other professionals, formal referral arrangements with media personalities, or traditional solicitor relationships, you will be required to execute the new Promoter Agreement. This includes relationships where no cash compensation exchanges hands, but each party agrees to refer clients to the other.  Click here for a copy of the new Promoter Agreement.

Sometimes you will act as a solicitor, referring clients to other advisors.  For example, when you refer a client to Maple Capital, Brinker or AssetMark, you are acting as a Promoter.  In these instances, you will use the agreement and disclosure required by those advisors.

What’s Changing:

1. Informal networking arrangements, and other formal arrangements where business was referred to you on an impersonal basis, will be subject to new compliance requirements and oversight; and
2. Advertisements, including social media posts, will be allowed to use testimonials and endorsements, as long as they comply with certain rules.  Advertisements on social media can only be provided via an approved business-related website and will be subject to review by the Advertising Guidance Team (“AGT”) prior to posting live on the website. 

what’s next?

ESI is working on updating its policies and procedures, as well as various documents impacted by the changes, and anticipates adopting the new regime in conjunction with the November 4, 2022 compliance date.  There will be additional communication, particularly regarding implementation of the new Promoter Agreement, as we approach the final compliance date.

QUESTIONS

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

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[1] See Rule 206(4)-1(a)(1).

[2] See Rule 206(4)-3.

[3] See Rule 206(4)-3(b).

[4] See Excellence in Advertising, Ltd., SEC No-Action Letter (December 15, 1986) (opining that it was not solicitation to advertise the financial planners generally, and then invite listeners to contact them for a referral to an investment adviser representative who had paid a fee, where the referrals were based on geography without considering a caller’s individualized needs); Int’l Ass’n for Financial Planning, SEC No-Action Letter (June 1, 1998) (same, but also opining that inquiring about general areas of interest pre-referral did not constitute a solicitation); Nat’l Football League Players Ass’n, SEC No-Action Letter (January 25, 2002)(same, even though referrals were not based on geography).

TC128692(0922)1

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