NASAA Series 66 Uniform Combined State Law ExaminationLaws, Regulations, and Guidelines, including Prohibition on Unethical Business PracticesMedium
A broker-dealer firm has established a policy that all customer complaints, whether written or oral, must be immediately documented and escalated to a designated principal for review within 24 hours. The policy also requires the firm to retain copies of all complaints and their resolutions for a period of five years. Under the Uniform Securities Act (USA), what is the primary purpose of such a policy?
- ATo comply with regulatory requirements for handling and supervising customer complaints.
- BTo identify and terminate agents who receive multiple complaints.
- CTo ensure that all complaints are resolved to the customer's satisfaction.
- DTo minimize the firm's legal liability for agent misconduct.
Show answer & explanationAnswer & explanation
Correct answer: A. To comply with regulatory requirements for handling and supervising customer complaints.
Broker-dealers are subject to strict regulatory requirements under the Uniform Securities Act (USA) and other rules concerning the handling of customer complaints. These regulations mandate prompt documentation, escalation, review by a principal, and retention of records to ensure investor protection and firm accountability. The policy directly reflects these regulatory obligations.
Why the other options are wrong
- B. Identifying problematic agents is a secondary benefit of effective complaint handling, but the primary purpose of the policy itself is adherence to regulatory mandates.
- C. While resolving complaints to satisfaction is a goal, the primary driver for such a formal policy is regulatory compliance, not just customer service.
- D. Minimizing liability is a benefit, but the fundamental reason for mandatory complaint procedures is regulatory compliance and investor protection.
BD Customer Complaint Handling
Broker-dealers must establish and maintain written procedures for promptly handling, documenting, supervising, and retaining records of all customer complaints, regardless of how they are received.
- Mandatory written procedures.
- Prompt documentation and escalation.
- Supervisory review by a principal.
- Record retention for specified period (e.g., 5 years).
Memory trick: Hear It, Write It, Send It, Keep It.