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PRIVATE PORTFOLIO, INC.WRITTEN SUPERVISORY PROCEDURES(Following the FINRA Written Supervisory Procedures Review Checklist, May 2006, from http://www.finra.org )COMPLIANCE MANUALRev. 9/9/2010Private Portfolio of San Diego, Inc.7534 La Jolla Blvd.La Jolla, Ca 92037-4720(858) 551-2071!1
WRITTEN SUPERVISORY PROCEDURESCOMPLIANCE MANUALAttestation - Comprehension of WSP Manual!ABOUT THIS MANUAL!Maintenance!Contents!CORPORATE ORGANIZATION!General!1212121212Corporate Officers and Registered Personnel!13Home Office!13Office(s) of Supervisory Jurisdiction!13GENERAL ADMINISTRATIVE!Form Filing – Rule 1140!1414Form BD Amendments!14Form U-4 / Form U-5 & Fingerprint Cards!14Designation of Executive Representative!14Designation of Principal Responsible for Supervision of Form Filings!14GENERAL BROKER/DEALER ACTIVITIES!Advertising and Sales Literature [Including e-mail and web sites]!!111515Cold Callers/Telemarketing Scripts!19Correspondence!19Institutional Sales Literature & Correspondence!20Customer Complaints!20Social Media Websites and Electronic Forums!20Material Event & Customer Complaint Reporting!21Distribution of Procedures and Amendments!21Gifts and Gratuities!21Outside Business Activities!21Periodic Review of Business and Supervisory System!22Private Securities Transactions – “Selling Away” !22Regulation S-P of Gramm-Leach-Bliley Act!262
SEC Custody Rule!27Speaking Engagements, Scripts, Chat Rooms!27RR ACTIVITIES!Rules You Should Know!Supervisors!29Qualifications of Supervisory Personnel!29All RRs Must Be Properly Registered!29Investigation of Background and Qualifications!30Records for RRs!30RRs’ Supervisors!30Annual RR Compliance Meeting!30Heightened Supervisory /Hiring Procedures!31Supervision of Statutorily Disqualified Persons!31Screening For SD Persons Hired in Clerical or Ministerial Positions!31Annual Written Attestation From RRs!31Obligations of RRs With Accounts at Other Broker/Dealers!32Parking of Securities Registrations!32Sharing in Customer Accounts!32Lending Between RRs and Customers!32Use of Exception and Other Reports!33Investment Advisor Activities!33BUSINESS CONDUCT OF REGISTERED es of Supervisory Jurisdiction!41Designated Compliance Responsibility!42Written Supervisory Procedures!42Heightened Office Inspections!45Supervision of Registered Representatives!46SUPERVISORY CONTROL SYSTEM!Limited Size and Resources Exception!!27284747Transmittals of Funds, Changes to Customer Account Information!48Customer Accounts Supervision - Addresses!493
!Customer Changes in Investment Objectives!49Heightened Supervision for Producing Managers!49ANNUAL CERTIFICATION OF COMPLIANCE!50AND SUPERVISORY PROCESSES!Chief Compliance Officer!5050Rule 3013(a)!50Certification of Compliance Processes!50FINANCIAL REPORTING/ BOOKS AND RECORDS!Maintenance of Books and Records!5151Books and Records Maintained in the Home Office!52Written Supervisory Procedures (Compliance Manual)!52FINRA Manual!52Notices to Members!52Customer New Account Form!52Updating Customer Account Information!53Personnel Files!53Regulatory Complaint File!54Prospectus/Offering Memorandum Files!54Fidelity Bond!54SIPC Logo!54Net Capital Rule!55Customer Protection Rule!57Financial Reporting and Backup!57Net Capital Computation!58Focus I Report!58Focus IIA Report!58Filing of Annual Audit Report!58Lost and Stolen Securities Registration!58FINRA Fees and Assessments!58SIPC Assessment!58FINRA Annual Assessment!59Margin Requirements/ Regulation T!59Regulation T!604
Fees charged to Customers!61Clearing Agreements!61Clearing!63Bank Secrecy Act!63Business Continuity Planning!64Taping Rule!64ANTI-MONEY LAUNDERING (AML) !1. Firm Policy!2. AML Compliance Person Designation and Duties!6464653. Giving AML Information to Federal Law Enforcement Agencies and Other FinancialInstitutions!664. Checking the Office of Foreign Assets Control Listings!685. Customer Identification Program!696. General Customer Due Diligence!747. Correspondent Accounts for Foreign Shell Banks!748. Due Diligence and Enhanced Due Diligence Requirements for Correspondent Accounts ofForeign Financial Institutions!759. Due Diligence and Enhanced Due Diligence Requirements for Private Banking Accounts/Senior Foreign Political Figures!7710. Compliance with FinCEN’s Issuance of Special Measures Against Foreign Jurisdictions,Financial Institutions or International Transactions of Primary Money LaunderingConcern!7911. Monitoring Accounts for Suspicious Activity!8012. Suspicious Transactions and BSA Reporting!8413. AML Recordkeeping!8714. Clearing/Introducing Firm Relationships!8915. Training Programs!8916. Program to Independently Test AML Program!9017. Monitoring Employee Conduct and Accounts!9018. Confidential Reporting of AML Non-Compliance!9119. Additional Risk Areas!9120. Senior Manager Approval!91CONTINUING EDUCATION!Contact Person: Monitoring Compliance with Regulatory Element!!91915
Firm Element!ALL SECURITIES-RELATED ACTIVITIES!Best Execution!929292Customer Funds & Securities Use!93Designated Securities/Penny Stocks!93Discretionary Accounts!93Fair Pricing!94Investor Education!95Approval of Account Name or Designation Changes for Orders!95New Account Review and Approval!95Order Audit Trail System (OATS) Requirements!96Opening Accounts and Transactions Involving Persons Associated with Other Broker/Dealers!97Order Tickets/Confirmations!97Parking of Securities!98Periodic Customer Account Review!98Prohibition Against Guarantees!98Research Analysts!98Restricted/Control Securities!98Securities Transactions for Personal and Family-Related Accounts!99Suitability!99Third-Party Accounts!100Trade Review!100Transactions Involving FINRA and AMEX Employees!101MUNICIPAL SECURITIES!Municipal Securities Rule-making Board!!102102Municipal Securities Principal!102Rule Book!102Financial Advisor Activities!102Underwriting Official Statements!102Underwriting Material Events!102Underwriting transaction assessments payable to MSRB!103Political Contributions!1036
Financial Consultants/ Payment for solicitation of municipal securities business! 103Sales during underwriting period/ New issue syndicate practices!103New Municipal securities issues; CUSIP Numbers and new issue requirements! 103Delivery of Investor Brochure Upon Receipt of Complaint/Customer ComplaintBrochure!103Customer Complaints!104Transaction reporting requirements; Real-Time Reporting System [RTRS]!104Use of Ownership Information obtained in Fiduciary or Agency Capacity!104Policies and procedures to ensure timely annual filing of Schedule I.!104Registered Representatives!104Sales Practices!104Uniform Practice Requirements!105Prompt Notice!106SEC Rule 15c2-12(c)!106Books and Records – Municipal Transactions!106FIXED INCOME SECURITIES!TRACE Reporting!Repurchase/Reverse Repurchase Transactions!106Bonds Borrowed and Loaned Transactions!106Adjusted Trading!106Municipal Securities!106Government Securities!107Mortgage Backed Securities!107Collateralized Mortgage Obligations!107OPTIONS!Options Principal!!106106107107Qualifications of Representatives!107Allocation Procedures!107Uncovered Short Option Contracts!108Position and Exercise limits!108Reporting Options Positions!108Verification of Customer Background and Financial Information!108Review/Approve New Accounts!1087
Delivery of Disclosure Documents!109Supervision!109Discretionary Accounts!109Branch Office Option Business!110Maintenance of Records!110Customer Grievances!110Suitability!110Options Communications With the Public!111Margin/Options!112Regulation T - Options!112Special Statement For Uncovered Options Writers!114INVESTMENT COMPANY PRODUCTS AND VARIABLE CONTRACTS!Prospectus Delivery!Redemption Procedures (Dealers Only)!115Verification of Customer Signatures!115Signature Guarantee!115Sales Charges!115Reciprocal Activity!116Sales Literature Review!116Non-Cash Compensation!116Mutual Funds & Unit Investment Trusts!117Review of Customer Accounts!117Bank Affiliated Broker/Dealer (BABD)!120Variable Annuities!120Underwriting Activities!120Municipal Underwritings!121Private Placements!121Hedge Funds!121Direct Participation Programs!121INSIDER TRADING!Purpose of Statement of Policy!!115115121121The Basic Insider Trading Prohibition!121Basic Concepts!1228
Tender Offers!124Procedures to Follow When Receiving Insider Information!124Provisions for Investigating Suspect Trades!124Updates On New or Revised Regulations!125Attestation – Insider Trading!126Investment Banking, Arbitrage, Research Firms!127Chinese Wall Procedures!127TRADING/MARKET MAKING!Online Trading & Day-Trading!!1271279
Ladies and Gentlemen:The policies of Private Portfolio, Inc. (PPI) strictly adhere to sound investment principles, goodbusiness practices, and the highest ethical standards. They are intended to ensure compliance with therules and regulations of the Financial Industry Regulatory Authority (FINRA), the Securities andExchange Commission (SEC), the Department of Corporations (DOC), and all other governing and/or regulatory authorities. This manual of Written Supervisory Procedures (WSPs) is intended as aguide both for Registered Representatives and for supervisors charged with enforcing these policiesand procedures.It is the desire of the officers of Private Portfolio, Inc. that company policies be conscientiously andeffectively followed and enforced. Toward that end, this manual is available online to all authorizedPPI associates in the secure internal section of the PPI website. Our WSPs are confidential, and arethe property of Private Portfolio, Inc. These WSPs are the basis for current operations at PrivatePortfolio, Inc., and supersede any preceding procedural manual you may have received.All representatives must read this WSP manual: you are responsible for its contents. Pleaseacknowledge reading and understanding it by signing and returning to the home office the 3Attestations included below (Comprehension, p. 10; Selling Away, p. 23; Insider Trading, p. 108). Allnew Registered Representatives must return these signed Attestations to the home office prior toconducting any securities investment business.Periodically, PPI will issue memoranda updating this manual. Revisions will be included online forpermanent reference. You will need to study all revisions carefully; again, you are responsible for allinformation included in them, and for acting in accordance with their content.If at any time you have questions that cannot be answered fully by referring to this manual, pleasefeel free to contact us at the home office.Thank you for your cooperation.Daniel Barba and Eduardo TovarPresident and Vice President, PPISeptember, 2010!10
Attestation - Comprehension of WSP ManualPrint out, sign, and return with original signature to:Eduardo TovarPrivate Portfolio, Inc.7534 La Jolla Blvd.La Jolla, California 92037-4720I acknowledge that I have read and understood the Private Portfolio, Inc., Written SupervisoryProcedures manual. I attest that while registered with PPI, I will comply fully with the policies andprocedures stated therein, including all subsequent additions of regulatory and/or compliancememoranda.Name: !(print)xRepresentative’s Signature ! !!!!RR#Date:11
ABOUT THIS MANUALBecause the welfare of the public is directly involved, the securities industry is one of the most highlyregulated industries in the United States. Standards required for proper selling of securities are spelledout in detail by various regulatory agencies. Failure to comply in strict accordance with the rules andregulations of the Securities and Exchange Commission, the Financial Industry Regulatory Authority,and the Department of Corporations, State of California, can have serious consequences for you andfor Private Portfolio, Inc.PPI has adopted various policies designed to serve the interests of our clients and the investing public,and to ensure compliance with securities laws and regulations. No individual at PPI has authority towaive compliance with the provisions of any law or rule of the regulatory bodies.MaintenanceIt is the policy of Private Portfolio, Inc. that all authorized persons have access to this manual.Amendments will be made to these WSPs at the behest of various regulatory agencies, and astechnology, business, and other factors affect procedures. Eduardo Tovar will insert amendments intothe online manual, located on the internal portion of the Private Portfolio website. He will also reviewand update these WSPs regularly, and will notify RRs when new information appears; RRs areresponsible for reading, understanding, and keeping up to date with these WSPs.ContentsThis manual follows the format of the FINRA Written Supervisory Procedures Review Checklist;relevant industry rules for each section follow section titles and/or subheadings. The manual specifiesthe regulations, policies, and procedures undertaken by PPI and its associates that are necessary forcompliance with our industry’s regulatory agencies, and to fulfill the requirements of good businesspractice and client service.The manual also contains three separate Attestations for the following: Comprehension of WrittenSupervisory Procedures; Insider Trading; Selling Away. All Registered Representatives areresponsible for signing and returning these to Eduardo Tovar at the home office. These will be kept inyour file as evidence that you are familiar with these WSPs, and with your responsibilities andprohibitions.CORPORATE ORGANIZATIONGeneralPrivate Portfolio, Inc. is a securities broker/dealer that conducts general securities business throughPershing LLC, including options, on a fully disclosed basis.Private Portfolio, Inc. is a California corporation with the following registrations: A broker/dealer registered with the Securities and Exchange Commission (SEC) A Registered Investment Advisor A member of the Financial Industry Regulatory Authority (FINRA) Certified as a broker/dealer by the State of California, Department of Corporations (DOC)!12
A member of the Securities Investor Protection Corporation (SIPC) Registered with the Securities Information Center (SIC) as an Indirect InquirerCorporate Officers and Registered PersonnelDaniel Barba, PresidentHermann von Bertrab, Eduardo Tovar, Vice PresidentsEduardo Tovar and Daniel Barba will register the business locations of all Registered Representativeson Form BR. The following is a current list of Private Portfolio’s Registered Representatives:Daniel BarbaJohn BentonHermann von BertrabJuan DieguezRegina LebrijaDavid MarshallThomas MullenPaul MullerFrank PaianoLuis Mario RodriguezGuillermo RosalesJaime SchwartzMateo de SolaEduardo TovarHome OfficeThe home office of Private Portfolio, Inc. is at 7534 La Jolla Boulevard, La Jolla, CA 92037-3552.The home office serves as central control for all broker/dealer activities. The home office includes theoffice of the president, financial control and accounting, operations, and other sections anddepartments necessary to the operation of the broker/dealer.Office(s) of Supervisory JurisdictionRules 3010(a)(3),(4),(5); Rule 3010(b)(3)Home Office: 7534 La Jolla Blvd., La Jolla CA 92037 ph: (858) 551-2072Designated principals at home office: Eduardo Tovar and Daniel Barba.Bond Trading Office: 437 Grant Street, Suite 632, Pittsburgh PA 15219 ph: (412) 232-3112Designated principals for Bond Trading Office: David Marshall, Eduardo Tovar, Daniel Barba.Each is an office of supervisory jurisdiction (OSJ).The Bond Trading Office and all non-OSJ offices are supervised by the home office: Eduardo Tovarand Daniel Barba.!13
GENERAL ADMINISTRATIVEForm Filing – Rule 1140Form BD AmendmentsNASD By-Laws Article IV, Sec 1Information provided in the membership application and on Form BD must be kept current, and anychanges must be updated within thirty (30) days of learning of facts that give rise to an amendment.All Form BD amendments must be filed electronically with FINRA, via Web CRD.Some circumstances that require filing an amended Form BD include changes in: applicant’s name;mailing or principal office addresses; proposed business activities; ownership or managementpersonnel; status of criminal, regulatory, civil, or other events disclosed in Item 11 of Form BD.Form U-4 / Form U-5 & Fingerprint CardsNASD By-Laws Article V, Sections 2 and 3; NTM 03-65; SEC Rule 17f-2After a successful interview, prospective Registered Representatives must complete and submitFINRA Applications (Form U-4) and fingerprint cards (for identification and appropriate processing),as well as registration with the State of California. PPI is required to make disclosures on all uniformregistration forms in a timely manner. Therefore, it is very important that all RegisteredRepresentatives update their Form U-4 applications whenever there is a change in any of theinformation previously provided (e.g., change of residential or business address, new outside businessactivity, etc.) Amendments should be promptly sent to Eduardo Tovar, who will file themelectronically with FINRA via Web CRD. NB: FINRA may impose a meaningful sanction againstPPI and its associates for failure to submit amendments to Form U-4, Form U-5, and Form BD in atimely manner.If applicants have been employed with another FINRA member firm, they must also submit theirForm U-5 to Mr. Tovar. Whenever a Registered Representative of Private Portfolio, Inc. is terminated,regardless of the reason, PPI is required to submit a Form U-5 to FINRA within thirty (30) days of thetermination date. Eduardo Tovar will make sure that all Registered Representatives who terminate orare terminated have received a copy of Form U-5. In addition, Private Portfolio, Inc. will require acopy of the most recent Form U-5 from any person seeking employment in a registered capacity.Designation of Executive RepresentativeNASD By-Laws Article IV, Sec. 3, 1150Private Portfolio, Inc. appoints and certifies to FINRA that Eduardo Tovar is our executiverepresentative to vote and act for PPI in all FINRA affairs. Eduardo Tovar is vice president and aregistered principal of PPI. He will maintain an e-mail account for communication with FINRA andwill keep the firm contact information up to date.Designation of Principal Responsible for Supervision of Form FilingsRule 1140Eduardo Tovar is the designated principal responsible for form filings.!14
GENERAL BROKER/DEALER ACTIVITIESAdvertising and Sales Literature [Including e-mail and web sites]2210, 2220; IM 2210-1;NTM 93-73,93-85; 95-74, 96-50, 98-3, 98-107, 00-15, 00-21, 01-80, 02-39;MSRB Rule G-21, SEC Rule 17a3(a)(20)(Complete information regarding FINRA advertising regulation: dvertising/p011979 )FINRAAdvertising Regulation Department9509 Key West AvenueRockville, MD 20850-3389DefinitionsMaterials designated as Advertising are as follows: Newspapers, magazines, telephone listings, or other public media and periodicals. Radio, telephone, recordings, motion pictures, videotape displays, and television. Sales literature, research reports, marketing letters, performance reports and summaries; Salesliterature includes not only advertising material but also all communications (whether oral or inwriting) to prospective investors that relate to the offer and sale of securities: seminarpresentation text and charts, tables, graphs, form letters, brochures, etc; Circulars, notices, reports, newsletters, signs/billboards. Reprints of any of the aforementioned or reprints of published articles.ApprovalAll advertising must be approved, as evidenced by initials, by Eduardo Tovar prior to filing or use,and will be filed with FINRA within ten (10) days of first use or publication. In addition, PPI is awarethat its advertising and sales literature is subject to routine spot-checks. Upon written request from theFINRA Advertising Department, PPI shall promptly submit requested material. PPI
Sep 09, 2010 · Fidelity Bond! 54 SIPC Logo! 54 Net Capital Rule! 55 Customer Protection Rule! 57 Financial Reporting and Backup! 57 Net Capital Computation! 58 Focus I Report! 58 Focus IIA Report! 58 Filing of Annual Audit Report! 58 Lost and Stolen Securities Registration! 58 FINRA Fees and Assessments! 58 SIPC As
