The Dangers of the Annual Compliance Questionnaire

At the end of the calendar year, or the start of the next one, numerous broker-dealers across the country will ask their financial advisors to complete an annual compliance questionnaire. The topics will cover business activities, including outside business activities, sales practices and methods, and general compliance with the firm’s policies and procedures, among other things. But be careful, as answering falsely can come back to haunt you.

Some financial advisors may be tempted to rush through the questionnaire putting down the answers they believe the firm wants to see. Others may not really read the questions and just guess at answers, or answer without thinking and evaluating what the correct answer is for the advisor. Be cautious, and avoid those traps. As discussed in this short video, firms and regulators use the answers and false answers can hurt you and your career. A false answer on the questionnaire might lead to disciplinary action by your firm, including termination. Further, if a FINRA examination should arise for some reason, FINRA examiners often obtain and review a financial advisor’s answers to these annual compliance questionnaires. False or misleading answers can result in increased sanctions for misconduct by the regulator, or it may give rise to an additional rule violation in a case against you.

Take your time. Consider the questions and answer carefully. And if you are concerned about answering a particular question, seek qualified and experienced legal counsel.