prioritizing limited resources: what you need to know thursday

2016 Financial Industry Regulatory Authority, Inc. All rights reserved. 1

Prioritizing Limited Resources: What You Need to Know Thursday, November 10 1:45 p.m. 2:45 p.m. Do you ever wonder how some small firm business owners manage their compliance requirements and still have time to have a successful practice with limited staff? Join FINRA staff and industry panelists as they share how they stay informed of regulatory changes and limit risk exposure, and provide tips and techniques they use to get the job done with limited resources. Moderator: David Greene District Director FINRA Los Angeles District Office Panelists: Nicholas Cochran Vice President American Investors Company Donna DiMaria Principal, Chief Executive Officer, and Chief Compliance Officer Tessera Capital Partners, LLC Carolyn May Compliance Consultant Smith, Brown & Groover, Inc.


Prioritizing Limited Resources: What You Need to Know Panelist Bios: Moderator: David Greene is District Director of FINRAs Los Angeles District 2 Office. He served in the same role at NASD before its 2007 consolidation with NYSE Member Regulation, which resulted in the formation of FINRA. In his capacity as District Director, Mr. Greene oversees the sales practice oversight process of FINRA-regulated securities firms based in District 2, as well their employees, with responsibility for ongoing surveillance, examinations and investigations. In January 2000, Mr. Greene joined FINRA (then NASD) as a regional counsel for FINRAs Enforcement Department, and was based in the Los Angeles District Office. For two-and-a-half years preceding his appointment as Director, Mr. Greene served as the Deputy Regional Chief Counsel, FINRA Enforcement Western Region, where his responsibilities included managing enforcement attorneys in FINRA district offices of Los Angeles, San Francisco, Denver and Seattle; developing and overseeing FINRAs national non-summary proceedings programs; as well as his own enforcement docket. Among the significant cases Mr. Greene handled were those involving mutual fund share classes, gifts and gratuities, market timing, brokered certificates of deposit, sales practice violations and operational compliance issues. Prior to joining FINRA, Mr. Greene was associated with a law firm in Los Angeles for 10 years. Mr. Greene received his undergraduate degree from Pepperdine University and his law degree from Southwestern University School of Law. Mr. Greene is licensed to practice law in California, and is admitted to practice before various federal courts. He is an executive committee liaison of the Los Angeles County Bar Association Business & Corporations Law Section and is frequently a speaker at securities industry events. Mr. Greene is also designated as a Certified Regulatory and Compliance Professional through the FINRA Institute at Wharton. Panelists: Nicholas C. Cochran is Vice President of American Investors Company, a FINRA member firm and registered investment adviser. Mr. Cochran served as President of the Alliance of Independent Broker-Dealers, a non-profit, mutual benefit corporation dedicated to the review and research of investment offerings, from 1998 through 2012; and also served as an elected Director of the National Association of Independent Broker-Dealers (NAIBD), an organization dedicated to small firm advocacy, from 2003 through 2010. Additionally, Mr. Cochran was elected to a four-year term on the Securities Industry/Regulatory Council on Continuing Education in 2009 and was elected Chair in 2012. Mr. Cochran had previously served on FINRAs Continuing Education Content Committee from 2004 through 2009. He served on the NASDs National Nominating Committee from 2001 through 2007, and was a member of NASDs Board of Governors in 1999 and 2000. Additionally, he was elected to the NASDs National Adjudicatory Council in 1998 and served as Chair in 1999 and 2000. Mr. Cochran also served as an elected member of NASD District 1 Committee from 1994 through 1996, was elected Chair in 1996 and was appointed to an additional one-year term in 2002. He has previously served three separate elected terms on the District 1 Nominating Committee, serving one term as Chair. Before joining American Investors Company in 1992, Mr. Cochran was President of the NASD member firm Equity Engineering, Inc., and in 1990 founded Nicholas C. Cochran & Associates, an investment planning and asset supervisory firm. In addition to his experience in the securities industry, Mr. Cochran has served as the Board Vice Chair and Finance Committee Chair at the Pacific Graduate School of Psychology, Vice President of Finance at the University of Phoenix, Corporate Accounting Manager for Raychem Corporation, Controller for Behavioral Research Laboratories and Senior Accountant for Price Waterhouse & Co. Mr. Cochran holds a CPA certificate and earned a bachelors degree from San Jose State University. Donna DiMaria, Principal, CEO and CCO, launched Tessera Capital Partners, LLC (Tessera) in March 2004. Tessera is an independent third party marketing firm representing both traditional and alternative investment strategies to institutional investors and financial intermediaries. The firm is a member of FINRA and SIPC. Tessera also operates as a State Registered Investment Adviser and is registered as a Municipal Advisor with the SEC and MSRB. Ms. DiMaria is the founder of the firm and serves as the companys CEO and CCO. In this role she oversees the firms compliance function and handles all of Tesseras due diligence. Prior to Tessera, Ms. DiMaria was the Director of Consultant Relations at WestAM where she also oversaw the firms marketing support functions. Prior to joining WestAM, Ms. DiMaria was a Vice President at Forstmann-Leff International where she was responsible


for US Consultant Relations and Institutional Sales. Before Forstmann-Leff, she was a Marketing Analyst and Fixed Income Product Specialist at UBS Asset Management. Prior to moving her career to the investment management industry, Ms. DiMaria was employed as an Investment Banking Analyst at Kidder Peabody and a MBS/ABS Accountant at Prudential Securities. Ms. DiMaria received a Bachelor of Science degree with a concentration in Finance from Binghamton University in May 1988. She graduated as a Stern Scholar with a Masters of Business Administration degree in Finance in May 1999 from NYUs Leonard N. Stern School of Business. Ms. DiMaria is the Chairman and Treasurer of the Third Party Marketers Association (3PM), she was also formerly the President of 3PM, a position she held for more than 5 years. She currently sits on FINRAs Membership Committee, is a member of the National Society of Compliance Professionals (NSCP), and a member of Beta Gamma Sigma, the premier honor society recognizing academic excellence in business studies. She holds the Series 7, 24, 63, 65, 79 and 99 licenses and recently sat for the Series 50 pilot examination. Carolyn R. May currently serves as a Compliance Officer for Smith, Brown & Groover, Inc., a full service retail broker dealer in Macon, GA. Prior to her association with SBG, Ms. May served as Senior Vice President and Chief Financial Officer of Simmons First Investment Group, Inc., a bank-affiliated, full service Broker Dealer in Little Rock, Arkansas. In addition Ms. May has been a Compliance Consultant to Broker Dealers, Investment Advisors, CPAs and attorneys for over 30 years. Her industry experience includes acting as Chief Compliance Officer and Chief Financial Officer for several regional and local small firms (both self-clearing and introducing). She has received her Certified Securities Compliance Professional (CSCP) certification through the program offered by the National Society of Compliance Professionals (NSCP). She has served as the Southern Regional Representative to FINRAs District 5 Committee as well as on FINRAs Small Firm Advisory Board; the District 5 Committee from 2003 2005 (acting as Vice Chairman and Chairman of the Committee); the Regional Nominating Committee for the South Region from 2004 2005; the District Nominating Committee from 2006 2007 (served as Chairman); the National Advisory Council (2005) and the Consultative Committee (2006 2007). In addition to committee service, she has been an instructor/developer for several NASD (now FINRA) Seminar Programs and has been an instructor for the Wharton NASD Institute for Professional Development. She has also served on various panels for FINRA Regional and National Firm Conferences and NSCP Regional and National Conferences. Ms. May has been a member of NSCP (National Association of Compliance Professionals) since 1989 (she served as Secretary of the Board of Directors from 1992 1994) and is a member of the SIFMA Compliance and Legal Division. Ms. May sits on the Board (Secretary) of the Arkansas Compliance Professionals Network (ACPN). She also has served as Chairman of the Board of the National Association of Independent Broker Dealers (NAIBD), a small firm advocacy group.

Small Firm ConferenceNovember 9-10, 2016 Phoenix, AZ

Prioritizing Limited Resources: What You Need to Know

FINRA Small Firm Conference 2016 FINRA. All rights reserved.

Moderator David Greene, District Director, FINRA Los Angeles District

Office PanelistsNicholas Cochran, Vice President, American Investors

CompanyDonna DiMaria, Principal, Chief Executive Officer, and Chief

Compliance Officer, Tessera Capital Partners, LLCCarolyn May, Compliance Consultant, Smith, Brown & Groover,

Inc.

1

Panelists


AML Procedures Updating FINRA Template FinCEN Notices

Dealing with RIAs and Funds SEC No Action Letter

Using Checklists and Tools Verification of Entities, Investor Due Diligence, Client Screening

2

Anti-Money Laundering (AML)


Product Due Diligence Employee Due DiligenceBackground ChecksOutside Business Activities

Third-Party Vendor Due Diligence Include Cybersecurity Questions

New Due Diligence vs. On-going Checks and Reviews Documentation!

3

Due Diligence


FINRA Cybersecurity Checklist Electronic Storage RequirementsSEC Rules

Low / No Cost Solutions Affects all areas of firm businessChanges in Code or Software

4

Cybersecurity


Diminished CapacityClients

Information Sharing

Reps

Training Red Flags and Escalation New Rule Proposal

5

Senior Issues


Google Alerts Email Lexicon Reviews Update Current Forms Explanation of what is considered a security List all sources of compensation Details regarding passive investments

Rule 3270.01 Roadmap for OBA Compliance Multiple OBAs due to affiliate relationships Consultants RIAs

6

Outside Business Activities / Private Securities Transactions


Keeping Up With ChangesRule Status Reports

Updating Policies and ProceduresCompliance MemosUse of outside vendors

FINRA WSP Checklist TestingCompliance Calendar

7

New Rules


System to Monitor Changes to State Rules Updating Forms Form BD Form ADV Insurance

8

State Registration


Time ManagementUtilize unlicensed personnel Free up management time by having admin gather infoUtilize reports for more than one compliance areaUse checklists and tools

9

Takeaways


Training Local FBIAttorneys / Regulatory WebinarsRegulatory ExaminersCompliance Associations FINRA Podcasts and Online Training

10

Takeaways


SubscriptionsEmail updates (FINRA Weekly Update, Notifications), podcasts,

RSS feeds, Twitter, LinkedInwww.finra.org/industry/subscriptions

Compliance Resource Provider Programwww.finra.org/complianceresourceprovider

CRD Small Firms Informationwww.finra.org/industry/webcrd/crd-small-firms-information

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FINRA Resources

http://www.finra.org/industry/subscriptionshttp://www.finra.org/complianceresourceproviderhttp://www.finra.org/industry/webcrd/crd-small-firms-information


SEC RIA No Action Letter Extension of No Action Letter Identity Verification for Entities Form Investor Due Diligence Form Client Screening Form Due Diligence Product New Product Onboarding Alternative Investments New Product Onboarding Non-Alternative Investments FINRA 5123 Test Form

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Handouts


Third-Party Vendor Matrix Small Firm Cybersecurity Checklist Client Information Sharing Form Senior Issues Red Flags OBA Disclosure Form OBA Review Matrix TCP Monthly Certification Form WSP Testing Template Sample Compliance Calendar

13

Handouts


Trade Associations and Other Compliance Information List

Cybersecurity Low/No Cost Solutions

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Handouts

Home | Previous Page

February 12, 2004

Mr. Alan SorcherVice President & Associate General CounselSecurities Industry Association1425 K Street, N.W., 7th FloorWashington, DC 20005-3500

Re: Financial Recordkeeping and Reporting of Currency and ForeignTransactions / Broker-Dealer Customer Identification Rule

Dear Mr. Sorcher:

I am writing in response to your letter of January 6, 2004, concerning thereliance provisions in the new broker-dealer customer identification rule("CIP Rule").1 Specifically, you have asked whether the staff of the Divisionof Market Regulation would recommend to the Securities and ExchangeCommission ("Commission") that enforcement action be taken if broker-dealers treat registered investment advisers ("advisers") as if they weresubject to an anti-money laundering program rule under 31 U.S.C. 5318(h)("AML Rule") for the purposes of paragraph (b)(6) of the CIP Rule.2

I understand the following facts are pertinent to your question. On April 29,2003, the Commission issued the CIP Rule jointly with the Treasury3 underSection 326 of the Uniting and Strengthening America by ProvidingAppropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001(USA Patriot Act).4 The rule is codified in 31 CFR Part 103,5 which containsregulations under the Bank Secrecy Act ("BSA").6 Commission Rule 17a-87

requires broker-dealers to comply with applicable BSA regulations,including the CIP Rule.8

The CIP Rule requires brokers-dealers to implement customer identificationprograms that contain the following elements: (1) procedures for verifyingthe identities of customers, (2) procedures for maintaining records of theverification process, (3) procedures for comparing customers with lists ofknown or suspected terrorists or terrorist organizations, and (4) proceduresfor providing customers with notice that information is being collected toverify their identities.9

Paragraph (b)(6) of the CIP Rule permits broker-dealers to rely on certainother financial institutions to undertake the required elements with respectto shared customers.10 The rule permits such reliance if, among otherthings, the other financial institution is subject to an AML Rule andregulated by a Federal functional regulator. Paragraph (b)(6) also requiresthat the reliance be reasonable under the circumstances and that therelied-on financial institution enter into a contract requiring it to certifyannually to the broker-dealer that it has implemented an anti-moneylaundering program, and that it will perform (or its agent will perform)specified requirements of the broker-dealer's customer identificationprogram. The reliance provisions are designed to permit two financialinstitutions with mutual customers to reach agreements between

Securities Industry Association: No-Action Letter dated February 12, 2004 https://www.sec.gov/divisions/marketreg/mr-noaction/sia021204.htm

1 of 3 10/25/16, 12:22 PM

themselves as to how they should allocate performance of the requirementsof the rule and, thereby, rely on one another to avoid unnecessaryduplication of efforts with respect to a given customer.

You state that the interrelationship between broker-dealers and advisers isthe type of situation intended to be covered by the reliance provisions. Inparticular, you point out that advisers have the most direct relationshipwith the customers they introduce to broker-dealers and, therefore, are inthe best position to perform some of the requirements of the CIP Rule. Youpoint out that the advisers typically are authorized to direct securitiestransactions in a securities account opened in the name of the customer ata broker-dealer.11 You also note that some advisers, for competitivereasons, may be hesitant to give broker-dealers direct access to theircustomers. You report that some advisers have implemented AML programsand will agree to enter into reliance contracts. You argue that broker-dealers will incur unnecessary compliance costs if they are not permitted torely on advisers.

Because these advisers are registered with the Commission, they meet therequirement that the relied-on financial institution be regulated by aFederal functional regulator. However, they are not currently subject to anAML Rule and, consequently, do not meet this condition of paragraph (b)(6)of the CIP Rule. On April 28, 2003, the Financial Crimes EnforcementNetwork (FinCEN), Department of the Treasury, proposed an AML Rule forregistered investment advisers.12 Final rules have not been adopted. Youhave asked that broker-dealers be permitted to treat registered investmentadvisers as if they are subject to an AML Rule for the purposes of paragraph(b)(6) of the CIP Rule. If such relief is granted and Treasury ultimatelydecides not to issue an AML Rule for advisers, you ask that broker-dealersbe permitted to continue relying on advisers under paragraph (b)(6) untilthirty days after Treasury publicly announces such a decision.

Based on the foregoing, the Division staff will not recommend enforcementaction to the Commission under Rule 17a-8 if a broker-dealer relies on aninvestment adviser, prior to such adviser becoming subject to an AML Rule,provided all the other requirements and conditions in paragraph (b)(6) ofthe CIP Rule are met, namely that: (1) such reliance is reasonable underthe circumstances; (2) the investment adviser is regulated by a Federalfunctional regulator; and (3) the investment adviser enters into a contractrequiring it to certify annually to the broker-dealer that it has implementedan anti-money laundering program, and that it will perform (or its agentwill perform) specified requirements of the broker-dealer's customeridentification program. This letter is withdrawn without further action on theearlier of: (1) the date upon which an AML Rule for advisers becomeseffective, or (2) February 12, 2005.

This is a staff position with respect to enforcement only and does notpurport to express any legal conclusions. It may be withdrawn or modifiedif the staff determines that such action is necessary to be consistent withthe BSA and in the public interest.

Sincerely,

Annette L. NazarethDirector


2 of 3 10/25/16, 12:22 PM

1 31 CFR 103.122.

2 Sections 203 and 203A of the Investment Advisers Act of 1940, and therules promulgated thereunder, govern which investment advisers mustregister with the Commission.

3 Customer Identification Programs for Broker-Dealers, Securities ExchangeAct of 1934 Release No. 47752 (April 29, 2003), 68 FR 25113 (May 9,2003) (CIP Rule Final Rule Release).

4 Pub. L. 107-56.

5 31 CFR 103.122.

6 31 U.S.C. 5311 et seq.

7 17 CFR 240.17a-8.

8 The CIP Rule applies to all "broker-dealer[s]" as defined in paragraph(a)(2) of the rule. Under the definition, a broker-dealer is any personrequired to register with the Commission under the Securities Exchange Actof 1934, except persons who register pursuant to 15 U.S.C. 78o(b)(11).

9 See 31 CFR 103.122(b)(2), (b)(3), (b)(4) and (b)(5), respectively.

10 31 CFR 103.122(b)(6).

11 Investment advisers also may open accounts in their own name at abroker-dealer to facilitate trading on behalf of their clients until transactionscan be settled to their clients' individual securities accounts at anotherbroker-dealer or bank. Less commonly, advisers may open omnibusaccounts for the benefit of their customers. In these cases, under the CIPRule, the investment adviser, rather than the beneficial owners, would bethe broker-dealer's customer.

12 68 FR 23646 (May 5, 2003).

Incoming Letter:

The Incoming Letter is in Acrobat format.

http://www.sec.gov/divisions/marketreg/mr-noaction/sia021204.htm

Home | Previous Page Modified: 02/09/2005


3 of 3 10/25/16, 12:22 PM

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

D I VIS ION OF

TRAD I NG AND MARKETS

January 9, 2015

Mr. Ira D. Hammerman Executive Vice President and General Counsel Securities Industry and Financial Markets Association 1101 New York Avenue, NW, 81h Floor Washington, DC 20005

Re: Request for No-Action Relief Under Broker-Dealer Customer Identification Program Rule (31 C.F.R. 1023.220)

Dear Mr. Hammerman:

In your letter dated January 5, 2015, you request assurances that the staff of the Division of Trading and Markets will not recommend enforcement action to the Securities and Exchange Commission under Rule 17a-8 under the Securities Exchange Act of 1934 ("Exchange Act") if a broker-dealer relies on a registered investment adviser to perform some or all of its customer identification program ("CIP") obligations, subject to certain enumerated conditions set forth in your incoming letter. Specifically, you request that the Division extend a no-action position that it took in 2013, which is substantially similar to previous no-action positions first taken by the Division in 2004. 1

See Letter from Annette L. Nazareth, Director, Division of Market Regulation, Securities and Exchange Commission, to Alan Sorcher, Securities Industry Association, dated February 12, 2004 (the "2004 Letter"); Letter from Annette L. Nazareth, Director, Division of Market Regulation, Securities and Exchange Commission, to Alan Sorcher, Securities Industry Association, dated February 10, 2005; Letter from Robert L.D. Colby, Acting Director, Division of Market Regulation, Securities and Exchange Commission, to Alan Sorcher, Securi ties Industry Association, dated July 11, 2006; Letter from Erik Sirri, Director, Division of Trading and Markets, Securities and Exchange Commission, to Alan Sorcher, Securities Industry and Financial Markets Association, dated January 12, 2008 ; Letter from Daniel M. Gallagher, Jr., Deputy Director, Division of Trading and Markets, Securities and Exchange Commission, to Ryan Foster, Securities Industry and Financial Markets Association, dated January 11 , 2010; Letter from Lourdes Gonzalez, Acting Co-Chief Counsel , Division of Trading and Markets, Securities and Exchange Commission, to Ryan Foster, Securities Industry and Financial Markets Association, dated January 11, 2011; Letter from Emily Westerberg Russell, Senior Special Counsel, Division of Trading and Markets, Securities and Exchange Commission, to Ira Hammerman, Senior Managing Director and General Counsel, Securities Industry and Financial Markets Association, dated January 11 ,2013 (the "2013 Letter").

Mr. Ira Hammerman Page 2 of 4 January 9, 2015

On February 12, 2004, the Division, in consultation with the Department of Treasury's Financial Crimes Enforcement Network ("FinCEN"), issued a letter stating that it would not recommend enforcement action to the Commission if a broker-dealer treated a registered investment adviser as if it were subject to an anti-money laundering program rule under 3 1 U.S.C. 5318(h) ("AML Program Rule") for the purposes of paragraph (b)(6) (now (a)(6)) of the CIP rule applicable to broker-dealers, 31 C.F.R. 103.122 (now 31 C.F.R. 1023.220) ("CIP Rule"). By its terms, the 2004 Letter was to be withdrawn without further notice on the earlier of: (1) the date upon which an AML Program Rule for investment advisers becomes effective, or (2) February 12, 2005. Because an AML Program Rule for investment advisers did not become effective, and in response to your subsequent requests for no-action relief, the no-action position in the 2004 Letter was extended for an additional18 months on February 10, 2005, for an additional18 months on July 11, 2006, for an additional two years on January 10, 2008, for an additional12 months on January 11, 2010, for an additional two years- subject to certain additional conditions- on January 11, 2011, and for an additional two years on January 11, 2013.

In your letter, you indicate that broker-dealers have come to rely on the no-action position that was taken in the Division's previous letters, and ask that the Division extend the position taken in the 2013 Letter.

Response

Without necessarily agreeing with your assertions, the Division, following further consultation with FinCEN staff, extends the no-action position in the 2013 Letter until the earlier of: (1) the date upon which an AML Program Rule for investment advisers becomes effective,2 or (2) two years from the date of this letter.

Accordingly, the Division will not recommend enforcement action to the Commission under Exchange Act Rule 17a-8 if a broker-dealer treats an investment adviser as if it were subject to an AML Program Rule for the purposes of paragraph (a)(6) of the CIP Rule provided that the other provisions of the CIP Rule are met, and: ( 1) the broker-dealer's reliance on the investment adviser is reasonable under the circumstances, as discussed in more detail below; (2) the investment adviser is a U.S. investment adviser registered with the Commission under the Investment Advisers Act of 1940; and (3) the investment adviser enters into a contract with the broker-dealer in which the investment adviser agrees that: (a) it has implemented its own anti-money laundering program consistent with the requirements of 31 U.S.C. 5318(h) and will update such anti-money

See Introduction to the Unified Agenda of Federal Regulatory and Deregulatory Actions, 79 FR 76455, 76609 (Dec. 22, 2014).

2


laundering program as necessary to implement changes in applicable laws and guidance, (b) it (or its agent) will perform the specified requirements of the broker-dealer's CIP in a manner consistent with Section 326 of the PATRIOT Act, (c) it will promptly disclose to the broker-dealer potentially suspicious or unusual activity detected as part of the CIP being performed on the broker-dealer's behalf in order to enable the broker-dealer to file a Suspicious Ac tivity Report, as appropriate based on the broker-dealer's judgment,3 (d) it will certify annually to the broker-dealer that the representations in the reliance agreement remain accurate and that it is in compliance with such representations, and (e) it will promptly provide its books and records relating to its performance of the CIP to the Commission, to a self-regulatory organization that has jurisdiction over the broker-dealer, or to authorized law enforcement agencies, either directly or through the broker-dealer, at the request of (i) the broker-dealer, (ii) the Commission, (iii) a self-regulatory organization that has jurisdiction over the broker-dealer, or (iv) an authorized law enforcement agency.

As to the reasonableness of a broker-dealer's reliance on an investment adviser, we understand that broker-dealers seeking to rely on the no-action position taken in this letter will undertake appropriate due diligence on the investment adviser that is commensurate with the broker-dealer's assessment of the money laundering risk presented by the investment adviser and the investment adviser's customer base. Such due diligence would be undertaken at the outset of the broker-dealer's relationship with the investment adviser, and updated during the course of the relationship, as appropriate.

Further, we expect that a broker-dealer's assessment of the money laundering risk presented by an investment adviser and the investment adviser's customer base would depend on the particular facts and circumstances. For example, in some instances, a broker-dealer may consider an affiliated investment adviser to present a lower money laundering risk than an unaffiliated investment adviser. The investment adviser's status as an affiliate, however, is one of many factors that may be relevant to such a risk

Firms are reminded that nothing in this no-action letter relieves a broker-dealer of its obligation to establish policies, procedures, and controls that are reasonably designed to detect and report suspicious activity that is attempted or conducted by, at, or through the broker-dealer. See 31 C.P.R. 1023.320(a)(2).

A broker-dealer that chooses not to avail itself of the relief being granted pursuant to this letter may still contractually del egate the implementation and operation of its CIP to an investment adviser; however, the broker-dealer will remain solely responsible for assuring compliance with the CIP Rule and therefore, must actively monitor the operation of its CIP and assess its effectiveness. See "Customer Identification Programs for Broker-Dealers," Exchange Act Release No. 47752 (Apr. 29, 2003), 68 FR 25113,25123 n. 132 (May 9, 2003).

4


assessment, and an affiliated investment adviser may or may not present a lower money laundering risk, depending on the facts and circumstances. 5

This is a staff position with respect to enforcement action only and does not purport to express any legal conclusions. It may be withdrawn or modified if the staff determines that such action is necessary to be consistent with the Bank Secrecy Act and in the public interest.

Sincerely,

L~~~ Lourdes Gonzalez Assistant Chief Counsel Division of Trading and Markets

See, ~. United States Senate, Permanent Subcommittee on Investigations, Committee on Homeland Security and Governmental Affairs, "U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History" (July 17, 2012), available at: http://www.hsgac.senate.gov/subcommittees/investigations/reports.

5

http://www.hsgac.senate.gov/subcommittees/investigations/reports

January 5, 2015

Via Electronic Mail

Lourdes Gonzalez

Assistant Chief Counsel

Division of Trading and Markets

U.S. Securities and Exchange Commission

100 F Street, N.E.

Washington, DC 20549

Re: Request for No-Action Relief under Broker-Dealer Customer Identification Rule (31 C.F.R. 1023.220)

Dear Ms. Gonzalez:

On behalf of its member broker-dealers, the Securities Industry and Financial Markets Association

(SIFMA)1 hereby requests that the staff of the Division of Trading and Markets (the Division) of

the U.S. Securities and Exchange Commission (the SEC or the Commission) extend the no-action

relief currently in effect with respect to the reliance provisions of the customer identification rule

applicable to broker-dealers (31 C.F.R. 1023.220) (the CIP Rule). 2

Under a letter dated January

11, 2013 (the 2013 No-Action Letter), the current relief expires January 11, 2015.3

As you know, the CIP Rule, which was adopted pursuant to Section 326 of the USA PATRIOT Act,4

requires each broker-dealer to adopt a written customer identification program (CIP) that includes

risk-based procedures for verifying the identity of each customer. The CIP Rule permits broker-

dealers to rely on certain financial institutions to perform CIP procedures with respect to shared

customers. Such reliance is permissible under the CIP regulations where: (1) it is reasonable under the

circumstances; (2) the relied-on financial institution is subject to an anti-money laundering program

rule (AMLP Rule) under 31 U.S.C. 5318(h) of the Bank Secrecy Act (BSA)5

and is regulated by

1 SIFMA brings together the shared interests of hundreds of securities firms, banks and asset managers. SIFMAs mission

is to support a strong financial industry, investor opportunity, capital formation, job creation and economic growth, while

building trust and confidence in the financial markets. SIFMA, with offices in New York and Washington, D.C., is the

U.S. regional member of the Global Financial Markets Association. For more information, visit www.sifma.org.

2 See Letter from Emily Westerberg Russell, Senior Special Counsel, Division of Trading and Markets, SEC, to Ira

Hammerman, Senior Managing Director and General Counsel, SIFMA, dated January 11, 2013, available at

http://www.sec.gov/divisions/marketreg/mr-noaction/2013/sifma011113-17a-8.pdf.

3 See id.

4 Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of

2001 (the USA PATRIOT Act), Pub. L. No. 107-56 (2001).

5 31 U.S.C. 5311 et seq.

http://www.sifma.org/http://www.sec.gov/divisions/marketreg/mr-noaction/2013/sifma011113-17a-8.pdf

Lourdes Gonzalez

January 5, 2015

Page 2 of 4

a federal functional regulator; and (3) the relied-on financial institution enters into a contract requiring

it to certify annually to the broker-dealer that it has implemented its anti-money laundering (AML)

program and that it (or its agent) will perform specified requirements of the broker-dealers CIP.6

The

reliance provision is designed to permit financial institutions with shared customers to agree as to how

they will allocate performance of the CIP requirements and, thereby, rely on one another to avoid

unnecessary duplication of efforts with respect to a given customer.

At the time that the CIP Rule became effective, SEC-registered investment advisers (RIAs) were the

subject of a proposed AMLP Rule that had not been finalized.7

As a result, broker-dealers were not

permitted under the CIP Rule to rely on RIAs to perform any part of their CIP requirements. For that

reason, SIFMA specifically sought no-action relief addressing a broker-dealers reliance on an RIA

under 31 C.F.R. 1023.220(a)(6) (then 31 C.F.R. 103.122(b)(6)) to perform some or all of the

broker-dealers CIP obligations with respect to shared customers. As discussed below, that relief was

granted and has since been extended a number of times, and SIFMA now seeks a further extension of

the Division staffs no-action position.

No-Action Relief to Date

The requested relief was first issued by the staff of the Division (then known as the Division of Market

Regulation), in consultation with the Department of the Treasurys Financial Crimes Enforcement

Network (FinCEN), in 2004. 8

Since that time, the no-action relief has been extended a number of

times,9

including three extensions granted after the withdrawal of FinCENs proposal to subject certain

investment advisers to an AMLP Rule.10

In each of the no-action letters since 2004, Division staff has stated that it will not recommend to the

Commission that enforcement action be taken under Rule 17a-8 under the Securities Exchange Act of

1934, as amended,11

based on a broker-dealers reliance on an RIA to perform certain CIP obligations,

subject to certain conditions. Most recently, under the 2013 No-Action Letter, Division staff stated

that it would not recommend enforcement action if a broker-dealer treats an investment adviser as if it

were subject to an AMLP Rule for the purposes of paragraph (a)(6) of the CIP Rule, provided that the

6 31 C.F.R. 1023.220(a)(6).

7 See Anti-Money Laundering Programs for Investment Advisers, 68 Fed. Reg. 23646 (May 5, 2003).

8 See Letter from Annette L. Nazareth, Director, Division of Market Regulation, SEC, to Alan Sorcher, Vice President and

Associate General Counsel, Securities Industry Association (SIA), dated February 12, 2004.

9 See Letter from Annette L. Nazareth, Director, Division of Market Regulation, SEC, to Alan Sorcher, Vice President and

Associate General Counsel, SIA, dated February 10, 2005; Letter from Robert L.D. Colby, Acting Director, Division of

Market Regulation, SEC, to Alan Sorcher, Vice President and Associate General Counsel, SIA, dated July 11, 2006; Letter

from Erik Sirri, Director, Division of Trading and Markets, SEC, to Alan Sorcher, Vice President and Associate General

Counsel, SIFMA, dated January 10, 2008; Letter from Daniel M. Gallagher, Jr., Deputy Director, Division of Trading and

Markets, SEC, to Ryan Foster, Manager, SIFMA, dated January 11, 2010 (the 2010 No -Action Letter); Letter from

Lourdes Gonzalez, Acting Co-Chief Counsel, Division of Trading and Markets, SEC, to Ryan D. Foster, Manager, SIFMA,

dated January 11, 2011 (the 2011 No-Action Letter); and the 2013 No-Action Letter.

10 See Withdrawal of the Notice of Proposed Rulemaking; Anti-Money Laundering Programs for Investment Advisers, 73

Fed. Reg. 65568 (November 4, 2008), and the 2010 No-Action Letter, the 2011 No-Action Letter and the 2013 No-Action

Letter, supra.

11 17 C.F.R. 240.17a-8.

Lourdes Gonzalez

January 5, 2015

Page 3 of 4

other provisions of the CIP Rule are met, and: (1) the broker-dealers reliance on the investment

adviser is reasonable under the circumstances;12

(2) the investment adviser is a U.S. investment adviser

registered with the Commission under the Investment Advisers Act of 1940, as amended; and (3) the

investment adviser enters into a contract with the broker-dealer in which the investment adviser agrees

that (a) it has implemented its own AML program consistent with the requirements of 31 U.S.C.

5318(h) and will update such AML program as necessary to implement changes in applicable laws and

guidance, (b) it (or its agent) will perform the specified requirements of the broker-dealers CIP in a

manner consistent with Section 326 of the PATRIOT Act, (c) it will promptly disclose to the broker-

dealer potentially suspicious or unusual activity detected as part of the CIP being performed on the

broker-dealers behalf in order to enable the broker-dealer to file a Suspicious Activity Report, as

appropriate based on the broker-dealers judgment, (d) it will certify annually to the broker-dealer that

the representations in the reliance agreement remain accurate and that it is in compliance with such

representations, and (e) it will promptly provide its books and records relating to its performance of

CIP to the Commission, to a self-regulatory organization that has jurisdiction over the broker-dealer, or

to authorized law enforcement agencies, either directly or through the broker-dealer, at the request of

(i) the broker-dealer, (ii) the Commission, (iii) a self-regulatory organization that has jurisdiction over

the broker-dealer, or (iv) an authorized law enforcement agency. As indicated above, this no-action

position is in effect until January 11, 2015.

Reliance on Registered Investment Advisers

As indicated in our prior requests for no-action relief, some of SIFMAs broker-dealer members have

come to rely on RIAs under the CIP Rule and the staffs no-action relief to perform some or all of the

CIP obligations related to customers with which both have a customer relationship. SIFMA believes

strongly that the reliance provisions of the CIP Rule play an important and necessary role in effective

anti-money laundering compliance because intermediary and shared business relationships are a

common and legitimate part of the securities industry and U.S. capital markets. RIAs are regulated by

a federal functional regulator, and many have established AML programs consistent with 31 U.S.C.

5318(h). Permitting two regulated financial institutions with a common customer to rely on one

another to perform some or all of the CIP requirements under the CIP Rule avoids duplication of

efforts and inefficient allocation of significant and costly resources.

SIFMA also believes that the interaction between broker-dealers and RIAs is precisely the type of

relationship intended to be covered by the reliance provisions, and that the staffs no-action relief

should continue to be available to firms in a position to implement such reliance. RIAs often have the

most direct relationship with the customers they introduce to broker-dealers, are best able to obtain the

necessary documentation and information from and about the customers, and therefore are in the best

position to perform some or all of the requirements of the CIP Rule. Moreover, RIAs are often

12 As to the reasonableness of a broker-dealers reliance on an investment adviser, Division staff stated in the 2013 No-

Action Letter its understanding that broker-dealers seeking to rely on the no-action position in the letter will undertake

appropriate due diligence on the investment adviser that is commensurate with the broker -dealers assessment of the money

laundering risk presented by the investment adviser and the investment adviser s customer base. Such due diligence would

be undertaken at the outset of the broker-dealers relationship with the investment adviser, and updated during the course of

the relationship, as appropriate. The staff stated further that a broker-dealers assessment of the money laundering risk

presented by an investment adviser and the investment advisers customer base would depend on the particular facts and

circumstances, and that an investment advisers status as an affiliate is one of many factors that may be relevant to such a

risk assessment. See 2013 No-Action Letter, at p. 3.

Lourdes Gonzalez

January 5, 2015

Page 4 of 4

reluctant to have the broker-dealer contact the customer because they view the broker-dealer as their

competitor. Accordingly, SIFMAs broker-dealer members would like to continue to have the staffs

no-action position available for reliance on RIAs under the CIP Rule to perform some or all of broker-

dealers CIP obligations with respect to shared customers.

Request for No-Action Relief

For the foregoing reasons, SIFMA respectfully requests that the Division staff extend the no-action

position stated in the 2013 No-Action Letter, subject to the conditions stated in that letter. We note

that FinCEN has publicly stated that it has drafted a notice of proposed rulemaking that would

prescribe minimum standards for AML programs to be established by certain investment advisers and

would require such investment advisers to report suspicious activity to FinCEN.13

* * *

We thank you for the opportunity to submit this no-action request and would be happy to discuss our

request. Please do not hesitate to contact me if you would like to discuss these matters further.

Respectfully submitted,

Ira D. Hammerman

Executive Vice President and General Counsel

cc: Jennifer Shasky Calvery, Director, FinCEN Jamal El-Hindi, Associate Director, FinCEN John Fahey, Branch Chief, SEC Emily Westerberg Russell, Senior Special Counsel, SEC Lindsay Kidwell, Special Counsel, SEC

13 See Introduction to the Unified Agenda of Federal Regulatory and Deregulatory Actions, 79 Fed. Reg. 76455, 76609

(December 22, 2014). FinCEN has stated further that it has been working closely with the Commission on issues related to

the draft proposal. See id.

http:FinCEN.13

MemberFINRA/SIPC,MARegisteredwiththeSECandMSRB

421PenbrookeDrive,Suite12BPenfield,NewYork14526(585)3643065www.tesseracapital.com

IdentityVerificationFormEntities

FullLegalName: ____________________________________________________________________

Exemptions

ProspectiveAdvisoryClientswhoareincludedinanyofthefollowingcategoriesareexemptfromtheClientidentificationprocedures:

CheckAllthatApply AccountsopenedforretirementplansestablishedundertheEmployeeRetirementIncome

SecurityActof1974(ERISA); An Entity that has an existing account with Tessera; provided Tessera has a reasonable

beliefthatitknowsthetrueidentityofthePerson; An Entity that is a department or agency of theU.S., of any State of theU.S. or of any

politicalsubdivisionofanyState; AnentityestablishedunderthelawsoftheU.S.,ofanyStateorofanypoliticalsubdivision

ofanyStateorunderan interstatecompactbetweentwoormoreStates, thatexercisesgovernmentalauthorityonbehalfoftheU.S.oranysuchStateorpoliticalsubdivision;

AnentitythatisafinancialinstitutionregulatedbyaFederalFunctionalRegulator;or anyentity,otherthanaBank,whosecommonstockoranalogousequityinterestsarelisted

ontheNewYorkStockExchangeortheAmericanStockExchangeorwhosecommonstockoranalogousequityinterestshavebeendesignatedasaNasdaqNationalMarketSecuritylisted onNasdaq StockMarket (except stock or interests listed underNasdaq SmallCapIssuesheading).Anentitythatisafinancialinstitution,otherthanaBank,isexemptonlytotheextentofitsU.S.operations.

Ifanentitydoesnotfitanyoftheabovecategorieslistedabovethenpleasecontinuetocompletetheremainderoftheforminitsentirety.


OtherNamesEntityDoesBusinessAs: ______________________________MainAddress: OtherLocations: TaxPayerIdentificationNumber: EntityFormedIn: ______________________________TypeofBusiness: ______________________________SourcesofIncome: ______________________________SourcesofFundsforthisAccount: ______________________________

IstheentityaforeigninstitutionlocatedoutsidetheUS?Yes No IstheentitylocatedinCanada,theUKorSwitzerland?Yes No (IftheanswertothelastquestionisNothenHeightenedVerificationisrequiredonthisentity)


IdentificationVerification

The following is a list of acceptable identification sources. Please select those items thatwerecollectedandverifiedforthespecificentity.

documentsverifyingtheexistenceof theEntity,suchascopiesofarticlesof incorporation,trust documents, operating agreements, partnership agreements or government issuedlicenses,certifiedbyaregulatoryauthoritywithwhichthe license isheldorthedocumenthasbeenfiled;

resolutionsorotherdocumentationcertifiedbyaseniorofficer,managerorothermember

of senior management verifying the ability of the entity to open a securities account orotherwisecontractfortheservicesbeingrequested;

certificates or other representations of directors,managing partners or othermembers of

seniormanagementof theentitydocumenting the authorityof the individualopening theaccountorcontractingforserviceswithTessera,todoso;

goodstandingcertificatesfromappropriatejurisdictions;and copiesorconfirmationsofanymaterialgovernmentissuedlicenses.ForUSBasedentitiesatleastoneoftheabovesourcesisrequiredtobecheckedandverified.Ifanentityislocated in Canada, UK or Switzerland, the entity shall be treated, for verification purposes, as if it werelocatedintheUS.FornonUSentitieslocatedoutsideofCanada,UKorSwitzerland,heightenedverificationisrequiredandatleast3oftheseverificationsourcesmustbecheckedandverified.Notes:

SupervisoryApproval:

Signature: ______________________________LisaRothAMLCO,TesseraCapitalPartners

Date:

InvestorName:

EntityType:

Investment:

Note:Includemanagernameandvehicleinvestedin

Istheprospectiveclientalegalentityingoodstanding? Yes NoNote:AttachcopyofinformationfromSecofStateWebsite

Doestheprospectiveclient'sinvestmentpolicyallowforinvestmentinthisstrategyorsecurity? Yes NoNote:Attachcopyofipsifavailable

WebsiteSearch Haveanymattersbeenuncoveredthatcouldaffecttheinvestment? Yes No

GoogleSearch Haveanymattersbeenuncoveredthatcouldaffecttheinvestment? Yes NoNote:Ifyes,thenaddappropriatedocumentation

CriminalSearch Haveanymattersbeenuncoveredthatcouldaffecttheinvestment? Yes No

CivilSearch Haveanymattersbeenuncoveredthatcouldaffecttheinvestment? Yes No

RegulatorySearch Haveanymattersbeenuncoveredthatcouldaffecttheinvestment? Yes NoNote:CheckSEC,FINRA,CFTC,SecofState,etc.

IstheinvestoranAccreditedInvestor? Yes No

Doesthisofferingrequireinvestortobeaccredited? Yes No

Hasasuitabilityassessmentbeencompleted? Yes NoNote:Attachacopyofthesuitabilityassessmenttothisdocument

Whoissigningtheinvestmentmanagementagreement?

Isthispersonauthorizedtoactonbehalfoftheclient? Yes No

Howdoyouknow?

Preparer:

NameandTitle

Name,TitleandDate

InvestorDueDiligenceChecklist



ClientScreeningForm

Name: ___________________________________________________________________________

AccountBeneficiary: ______________________________

Completeonlyifdifferentthanthepersonopeningaccount

Theclienthasbeenscreenedagainstthefollowinglistsandisnotamatch: OFACList

FirmDesignatedProhibitedPersonList

PersonsProhibitedbyFutureLaworRegulationList

FINCENAdvisory

ThisclientisconsideredtobeaHighRiskClientforthefollowingreasons: SeniorForeignPoliticalFigure

LocatedoutsidetheUS(exceptionsare:Canada,theUKandSwitzerland)

ForeignBank

FINCENAdvisory

OtherHighRiskPerson ________________________________(describereason)


Signature: ______________________________LisaRothAMLComplianceOfficer,TesseraCapitalPartners

Date:

DueDiligenceReport

I. Summary

FundName:

Address:

KeyContactInformation

TargetFundSize

CapitalRaisedtodate:

ClosingDate:

II. GeneralPartnerInformation Fulllegalnameoffund:

Fundtype:

GP:

PrimarycontactinformationforGeneralPartner:

ThePartnership

TheOffering

PurposeofthePartnership:

ObjectivesofthePartnership:

Sponsor:

Detailsofownershipstructure

Legalstructureoffund:

DomicileofFund:

Offshorevehicles:

DomicileofOffshoreFund: InvestmentManager:

Describeorganization,including:partners,principals,andassociates

DoesFirm/Managerhaverealestatefocusedresearchprofessionals?

HistoryoftheFirm

IstheInvestmentManagerregistered?

Doesthefirmoranypersonnelhaveanydisclosureitems,hadtheirlicensessuspended,

cancelledorrevoked,beenbarredfromtheindustry,hadanydisciplineactionsagainstthem?

TotalAUMmanaged PreviousFundInformation

Arethereanyotherissuesthatcouldaffectthemanagementofthefund?

III. LegalIssuesAffectingGPs Arethereanyoutstandinglegaljudgmentsagainstthepartnersorprofessionals?

Arethereanyconflictsofinterest?

WhatcontrolsareinplacetoprotecttheinterestsoftheFundsInvestors?

IV. TheStrategy

LocationofthePropertiesandsurroundingareasBlindPool

Objective:

V. PartnershiplevelInformation TheOffering:

EligibleInvestors:

TargetCapitalRaise:

Amountraisedtodate: UseofProceeds

WillGPinvestaslimitedpartner;

Ifsowhoandhowmuch?

WillPrincipals,employeesorotheraffiliatedindividualsbeallowedtomakepersonalinvestmentsinthefund?

SharesandMinimumcommitment

CompensationoftheGP

ManagementfeesfortheGP?

Isleverageused?

PerformanceandPreferredReturn

Subscriptions(timingandnotice)

RedemptionsandTerms(timing,noticeandlockup)

Distributions:

TransfersofShares

WhatistheholdingperiodforthisFund:

ShareholderMeetings:

Willnewmoneybeacceptedaftercapacityofthefundisreached?

VI. Organization/ManagementTeam DescribetheOrganization

Howlonghavekeyprincipalsworkedtogether?

BiosofOfficers

Havetherebeenanyturnoveramongseniorinvestmentprofessionalsoverthepastthreeyears?

EmploymentContractsinPlace?Ifnothowdotheyretainpeople?

BoardofDirectors?Isthereone?

PreviousExperienceApplicabletoCurrentFund

OtherActivitiesoftheGPanditsAffiliates

Locationsofoffices?

Doesthefirmcarryanyinsurance?

VII. InvestmentEnvironmentandCompetition Howdoyoumonitorthecurrentmarketenvironment?

CurrentMarket

CompetitiveAdvantages

Competitors

VIII. InvestmentManagementandDecisionMakingProcess

DescribetheinvestmentdecisionmakingprocessandeveryonesroleInclude:InvestmentCommitteeandanyothercommitteesthatmightbeapartoftheprocess

Howareinvestmentopportunitiesstaffed?

Howareprojectsidentifiedandselected?

Howarepropertiesevaluated?

IX. StrategyandApproach

SummaryofInvestmentStrategy

Investmentphilosophy

DescribehowthePartnershipmonitorsitsinvestment.

X. EvaluationofRisk

Describethepotentialriskfactorsrelatedtooverallmarketconditions.

OtherRiskFactors

ConflictsofInterest:

FinancialForecasts:

Describeyouroperationalriskmanagementprocessincluding:AccountingandReporting,BankAccountsandControls,InformationSystems

LegalDueDiligenceProcess

XI. Performance

Whatisthefundstargetedperformance?

Howwilltheperformancebeachieved?

DiscussthekeyfactorsthatmayimpactthefinancialperformanceofthePartnership.

Arereturnsdesignedtobeabsoluteorrelativetoanindex? Dotheprincipalshaveconsistentlongtermtrackrecord?

Howdotargetedreturnscomparetoactualreturns?

XII. Compliance

Whohandlesthefirmscompliance?

Anymaterialcriminal,civiloradministrativeproceedingsagainstthefirmoritspersonnel?

XIII. OperationsandBackoffice

Accounting

Howdoyouinforminvestorsastominorandmajorchangesmaketoyourprocess?

Whatreportsandinformationdoyouprovide?

Whataretheoperationaloraffiliaterelationships?

Firmpoliciesandprocedures?

AntiMoneyLaunderingProcedures

BCPandDRP

Cybersecurity

ServiceProviders

XIV. Documentsrequiredforduediligence:

OfferingMemorandum PartnershipAgreement SubscriptionDocument AuditReports LLCDocuments OperatingAgreement CopyofRegDFiling BadActorsCertification SECExamReportsIncludingFindingsanddeficiencylettersifavailable. ADVPartsI&II(2A&2B)+FormPF AnySubpoenasorRegulatoryActionNotices AMLpolicywithdetailsonCIP BCP/DRPPlans PolicyandProceduresmanual AnyandallMarketingmaterials Monthlyperformanceinexcelspreadsheet AccesstoWebsiteifpasswordprotected AnyRegulatoryfilingsifappropriate DetailsonOwnershipstructureifnotinPPM BiosordescriptionofanyownersnotinPPM Anypastorcurrentlitigation,arbitrationsorlegalproceedingsagainstfirm ListofserviceprovidersifnotincludedinPPM Writtendescriptionofinvestmentprocessasdetailedaspossible

Listofallsocialmediausedbyfirm Anyotherinformationyouwanttotellus.

XV. OtherInformation Reviewofsubscriptiondocuments

ReviewofLPAgreement

Reviewofanyotherkeydocs

Sitevisits

Staff/PrincipalMeetingsandconferencecalls.

Member NASD / SIPC

New Product Approval Evaluation Form

Product Name: Brief Product Description:

If you require additional space attach additional pages to this document.

Is the product similar to any product currently offered by the firm? Yes No Would you consider this product to be More or Less complex than other products currently offered by the firm? What types of investors would be interested in this product? Retail Institutional Was the product designed for a specific geographic region? Yes No If Yes, please specify: How many competitors are there in relation to this product offering? Is the product competitive with other similar products available in the industry? Yes No Is the experience required to sell this product similar to the experience required to sell any of the firms existing products Yes No Will employee training be required? Yes No Are there any conflicts of interest related to the sale of this product with the firms existing business lines? Yes No What is the proposed fee for this product? Are there are specific resources required to sell this product? Yes No

If Yes, please specify:

708 Third Avenue, 6th Floor New York, NY 10017 (212) 209 3822 www.tesseracapital.com

Member NASD / SIPC

Please submit any comments, materials or other relevant information you have pertaining to this product. Tesseras goal is to ensure that a fair and thorough review may be undertaken in

order to protect the firm and its employees.

Submitted by: Reviewed by: Name: Name: Signature: Title: Date: Date: Status: Accepted Rejected More information requested Date: Notes: Status: Accepted Rejected More information requested Date: Notes:

708 Third Avenue, 6th Floor New York, NY 10017 (212) 209 3822 www.tesseracapital.com

New Product Onboarding Alternative and Direct Investments

o Make an initial determination as to whether or not a particular product is worthy of further consideration and whether it warrants a place on the firms platform, if approved, i.e., that it may be suitable for someone. A particular focus during this initial step will involve an evaluation of risks, potential rewards and conflicts of interest.

o Initial evaluation of deal drivers is crucial; for example, how might rising interest rates or dramatic changes in the price of oil and gas affect a particular investments prospects and outcome. Does the particular investment under consideration have a reasonable chance of meeting its objectives and/or reaching a successful outcome? Are any inherent conflicts of interest adequately addressed and resolvable?

o Review prospectus/offering memorandum, paying particular attention to use of proceeds, fees, deal terms and sharing arrangements, profit participation, etc., for fairness; where financial forecasts are included, assess reasonableness of attendant assumptions

o Selectively obtain third party DD reports; third party DD reports (see current utilization list below) are ancillary documents used in connection with execution of the firms internal DD requirements. They are not a substitute for the firms internal DD requirements but are used to augment the firms responsibilities in those areas best served by a third party, e.g., principal background checks, disclosure/disposition of regulatory issues, if any, review of sponsor and deal-related organizational documents, verification of escrow/title/leasehold/insurance coverage/encumbrance documentation, tax issues, prior performance and adequacy of legally-required disclosures

o Third party DD providers will be subjected to the same level of initial and ongoing scrutiny as offering sponsors in order to ascertain their general capabilities, staffing levels and specific competencies.

o Obtain and review audited financial statements, where available; ensure the auditors are credible

o Obtain and review other third party independent reports, where applicable, including such items as real estate appraisals, property condition reports, geology, engineering and/or leasehold valuation reports; other independent reports in instances where valuations are essential, e.g., repriced follow-on offerings; assess credibility of underlying report providers

o Arrange site visit if vetting a new sponsor and/or meet face-to-face with principals; because of heightened uncertainty and attendant risk in onboarding a new sponsor, extra care and diligence will be taken in order to establish a high level of comfort with respect to a new sponsors reputation, prior experience, background, etc., before seriously entertaining new product offerings

o Where appropriate and/or where deemed necessary, obtain list of other BDs in the selling group and confer therewith

o Make an assessment as to whether the stated suitability guidelines are sufficient and determine whether ancillary acknowledgments are warranted for the purpose of enhancing compliance considerations

o Ensure training availability through AI Insight; if no training is available, consider severely limiting who can sell the product based on predetermined factors

o Prepare an internal memorandum detailing the firms DD process, what was reviewed, what material questions arose, if any, and how they were disposed of

o Conduct ongoing due diligence for purposes of continuing in-force selling agreements, through: A periodic review of sponsor-filed quarterly reports and SEC filings, where

applicable A periodic review of third-party DD provider quarterly reports and

sponsor updates Participate in third-party DD provider conference calls Attend industry trade group meetings and DD forums

o Third party DD providers with whom AIC has current relationships are listed below. Both sponsor and/or program-level reports are obtained from one or more providers, as deemed necessary. Third party reports are considered ancillary to and an adjunct of the firms principal responsibility for conducting adequate internal due diligence on any program(s) with which the firm enters into a selling agreement. Mick Law, P.C., LLO, Omaha, NE Bowman Law Firm, LLC, McEwen, TN FactRight, LLC, Minneapolis, MN SK Research LLC, Columbia, MD Buttonwood Investment Services, LLC, Littleton, CO Miterko & Associates, Roswell, GA

New Product Onboarding Mutual Funds (MF)

Insurance-based product (IBP) Third-party asset management programs (TAMP)

o Meet with wholesaler for initial product introduction (usually as a result of a field referral from one of our RRs)

o Make an initial determination as to whether or not the product is worthy of further consideration and whether it warrants a place on our platform, if approved, i.e., that it may be suitable for someone

o Review prospectus and/or offering documents and marketing materials o Selectively obtain general due diligence information, where available, using such

resources as: Morningstar Insurance company rating information SEC ADV filings and updates

o In the case of indexed annuities, insure that new products fall within the companys established product guidelines vis a vis, surrender charges, insurance company ratings, no two-tier structure, etc.

o In the case of TAMPs, insure a minimum of three-year history o Review audited results and GIPS compliant performance data, where available;

investigate alternative assurances if such information is not available o Arrange a site visit, face-to-face meeting or teleconference with principals if

vetting a new sponsors, where appropriate o Obtain list of other BDs in the selling group and confer therewith, if deemed

necessary o Make an assessment as to whether the stated suitability guidelines, if any, are

sufficient and determine whether ancillary acknowledgments are warranted for the purpose of enhancing compliance considerations



FINRARule5123Test

OfferingName: _____________________________________________________________________

FINRARule5123TestEachmemberthatsellsasecurityinanonpublicofferinginrelianceonanavailableexemptionfromregistrationundertheSecuritiesAct(privateplacement)must:

(i) submittoFINRA,orhavesubmittedonitsbehalfbyadesignatedmember,acopyofanyprivateplacementmemorandum,termsheetorotherofferingdocument,includinganymaterially amended versions thereof, used in connection with such sale within 15calendardaysofthedateoffirstsale;or

(ii) indicatetoFINRAthatnosuchofferingdocumentswereused.

ExemptionsThefollowingprivateplacementsareexemptfromtherequirementsofthisRule:

1. offeringssoldbythememberorpersonassociatedwiththemembersolelytoanyoneormoreofthefollowing:

a. institutionalaccounts,asdefinedinRule4512(c);b. qualifiedpurchasers,asdefined inSection2(a)(51)(A)of the InvestmentCompany

Act;c. qualifiedinstitutionalbuyers,asdefinedinSecuritiesActRule144A;d. investmentcompanies,asdefinedinSection3oftheInvestmentCompanyAct;e. an entity composed exclusively of qualified institutional buyers, as defined in

SecuritiesActRule144A;f. banks,asdefinedinSection3(a)(2)oftheSecuritiesAct;g. employeesandaffiliates,asdefinedinRule5121,oftheissuer;h. knowledgeableemployeesasdefinedinInvestmentCompanyActRule3c5;i. eligiblecontractparticipants,asdefinedinSection3(a)(65)oftheExchangeAct;andj. accredited investors described in Securities Act Rule 501(a)(1), (2), (3) or (7). **

2. offeringsofexemptedsecurities,asdefinedinSection3(a)(12)oftheExchangeAct;

3. offeringsmadepursuanttoSecuritiesActRule144AorSECRegulationS;4. offeringsofexemptsecuritieswithshorttermmaturitiesunderSection3(a)(3)oftheSecurities


ActanddebtsecuritiessoldbymemberspursuanttoSection4(2)oftheSecuritiesActsolongasthematuritydoesnotexceed397daysandthesecuritiesareissuedinminimumdenominationsof$150,000(ortheequivalentthereofinanothercurrency);

5. offerings of subordinated loans under SEA Rule 15c31, Appendix D (see NASD Notice to

Members0232(June2002));

6. offeringsofvariablecontracts,asdefinedinRule2320(b)(2);

7. offerings of modified guaranteed annuity contracts and modified guaranteed life insurancepolicies,asreferencedinRule5110(b)(8)(E);

8. offerings of nonconvertible debt or preferred securities that meet the transaction eligibility

criteriaforregisteringprimaryofferingsofnonconvertiblesecuritiesonFormsS3andF3;9. offeringsofsecurities issued inconversions,stocksplitsandrestructuringtransactionsthatare

executed by an already existing investor without the need for additional consideration orinvestmentsonthepartoftheinvestor;

10. offeringsofsecuritiesofacommoditypooloperatedbyacommoditypooloperator,asdefined

underSection1a(11)oftheCommodityExchangeAct;11. businesscombinationtransactionsasdefinedinSecuritiesActRule165(f);12. offeringsofregisteredinvestmentcompanies;13. standardizedoptions,asdefinedinSecuritiesActRule238;and14. offerings filed with FINRA under Rules 2310, 5110, 5121 and 5122, or exempt from filing

thereunderinaccordancewithRule5110(b)(7).


Whoistheinvestor? Whattypeofentityismakingtheinvestment? Doestheinvestorfallunderoneoftheexemptionslistedabove?Yes NoWhichexemption? IfNo,thencompletethefollowing:Dateofsubscription? DatePPMorOfferingDocumentsFiledwithFINRA


Signature: ___________________________DonnaDiMariaChiefComplianceOfficer,TesseraCapitalPartners

Date:


DefinitionsUsedAccreditedInvestor: ((1)Anybankas defined insection 3(a)(2) oftheAct, or any savings and loan association or otherinstitution as defined insection 3(a)(5)(A) of theActwhether acting in its individual or fiduciarycapacity; anybroker or dealer registered pursuant tosection 15 oftheSecurities Exchange Act of1934; anyinsurance companyas defined insection 2(a)(13) oftheAct; anyinvestmentcompanyregistered under theInvestment Company Act of 1940or abusiness developmentcompanyasdefinedinsection2(a)(48)ofthatAct;anySmallBusinessInvestmentCompanylicensedby the U.S.Small Business Administrationundersection 301(c) or (d) oftheSmall BusinessInvestmentActof1958;anyplanestablishedandmaintainedbyastate,itspoliticalsubdivisions,orany agency or instrumentality of astateor its political subdivisions, for the benefit of itsemployees, if suchplanhas total assets inexcessof$5,000,000; anyemployeebenefitplanwithinthemeaningoftheEmployeeRetirement IncomeSecurityActof1974if the investmentdecision ismadebyaplanfiduciary,asdefinedinsection3(21)ofsuchact,whichiseitherabank,savingsandloan association,insurance company, or registered investment adviser, or if theemployee benefitplanhas total assets in excess of $5,000,000 or, if a selfdirectedplan, with investment decisionsmadesolelybypersonsthatareaccreditedinvestors;(2)Any privatebusiness development companyas defined insection 202(a)(22) oftheInvestmentAdvisersActof1940;(3)Anyorganizationdescribedinsection501(c)(3)oftheInternalRevenueCode,corporation,Massachusettsorsimilarbusinesstrust,orpartnership,notformedforthespecificpurposeofacquiringthesecuritiesoffered,withtotalassetsinexcessof$5,000,000;(7)Anytrust,withtotalassetsinexcessof$5,000,000,notformedforthespecificpurposeofacquiringthesecuritiesoffered,whosepurchaseisdirectedbyasophisticatedpersonasdescribedin230.506(b)(2)(ii);and

**PleasenotethatthedefinitionofanaccreditedinvestorforthePurposeofRule5123doesnotincludetheexemptionsforeverytypeofaccreditedinvestors.

InstitutionalAccount

(1) abank,savingsandloanassociation,insurancecompanyorregisteredinvestmentcompany;

(2) aninvestmentadviserregisteredeitherwiththeSECunderSection203oftheInvestmentAdvisersActorwithastatesecuritiescommission(oranyagencyorofficeperforminglikefunctions);or

(3) anyotherperson(whetheranaturalperson,corporation,partnership,trustorotherwise)withtotalassetsofatleast$50million.


QualifiedInstitutionalBuyer:

(1) Anyofthefollowingentities,actingforitsownaccountortheaccountsofotherqualifiedinstitutionalbuyers,thatintheaggregateownsandinvestsonadiscretionarybasisatleast$100millioninsecuritiesofissuersthatarenotaffiliatedwiththeentity:

a. Anyinsurancecompanyasdefinedinsection2(a)(13)oftheAct;

b. AnyinvestmentcompanyregisteredundertheInvestmentCompanyActoranybusinessdevelopmentcompanyasdefinedinsection2(a)(48)ofthatAct;

c. AnySmallBusinessInvestmentCompanylicensedbytheU.S.SmallBusiness

Administrationundersection301(c)or(d)oftheSmallBusinessInvestmentActof1958;d. Anyplanestablishedandmaintainedbyastate,itspoliticalsubdivisions,oranyagency

orinstrumentalityofastateoritspoliticalsubdivisions,forthebenefitofitsemployees;e. AnyemployeebenefitplanwithinthemeaningoftitleIoftheEmployeeRetirement

IncomeSecurityActof1974;f. Anytrustfundwhosetrusteeisabankortrustcompanyandwhoseparticipantsare

exclusivelyplansofthetypesidentifiedinparagraph(a)(1)(i)(D)or(E)ofthissection,excepttrustfundsthatincludeasparticipantsindividualretirementaccountsorH.R.10plans.

g. Anybusinessdevelopmentcompanyasdefinedinsection202(a)(22)oftheInvestment

AdvisersActof1940;h. Anyorganizationdescribedinsection501(c)(3)oftheInternalRevenueCode,

corporation(otherthanabankasdefinedinsection3(a)(2)oftheActorasavingsandloanassociationorotherinstitutionreferencedinsection3(a)(5)(A)oftheActoraforeignbankorsavingsandloanassociationorequivalentinstitution),partnership,orMassachusettsorsimilarbusinesstrust;and

(2) AnyinvestmentadviserregisteredundertheInvestmentAdvisersAct.

(3) Anydealerregisteredpursuanttosection15oftheExchangeAct,actingforitsownaccountortheaccountsofotherqualifiedinstitutionalbuyers,thatintheaggregateownsandinvestsonadiscretionarybasisatleast$10millionofsecuritiesofissuersthatarenotaffiliatedwiththedealer,Provided,Thatsecuritiesconstitutingthewholeorapartofanunsoldallotmenttoorsubscriptionbyadealerasaparticipantinapublicofferingshallnotbedeemedtobeownedbysuchdealer;

(4) Anydealerregisteredpursuanttosection15oftheExchangeActactinginarisklessprincipal

transactiononbehalfofaqualifiedinstitutionalbuyer;


Qualifiedpurchaser:

(1) Individualswhoown$5millionininvestments,whichincludesecurities,financialcontractsenteredintoforinvestmentpurposes,cash,cashequivalentsheldforinvestmentpurposes,realestateheldforinvestmentpurposes,CDs,bankersacceptancesandothersimilarbankinstrumentsheldforinvestmentpurposes.Investmentsdonotincluderealestateheldforpersonalpurposes,jewelry,art,antiques,andothercollectibles.Debtusedtoacquiretheinvestmentsisexcludedfromthevalueoftheinvestments;

(2) Institutionalinvestorswhoown$25millionininvestments;

(3) Afamilyownedcompanythatowns$5millionininvestments;

(4) Fortrustswithlessthan$25million,atrustwherethetrusteeandeachpersonwhocontributesassetstothetrustisaQualifiedPurchaser;

(5) A"QualifiedInstitutionalBuyer"underRule144Aofthe33Act,exceptthat"dealers"underRule

144mustmeetthe$25millionstandardofthe1940Act,ratherthanthe$10millionstandardofRule144A.Rule144Agenerallydefinesa"QualifiedInstitutionalBuyer"asinstitutions,includingregisteredInvestmentCompanies,thatownandinvestonadiscretionarybasis$100millionofsecuritiesthatareaffiliatedwiththeinstitution,banksthatownandinvestonadiscretionarybasis$100millioninQIBsecuritiesandhaveanauditednetworthof$25million,andcertainregistereddealers;

(6) AcompanyownedbeneficiallyonlybyQualifiedPurchasers;however,acompanywillnotbe

deemedtobeaqualifiedpurchaserifitwasformedforthespecificpurposesofacquiringthesecuritiesofferedbya3(c)(7)fund.

TesseraCapitalPartners,LLC Asof: 10/4/2016ThirdPartyServiceProviders

NameofProvider ServicesProvided

FrequencyofService/Typeof

Contract

Agreementonfile DateContracted Expiration AutoRenewel

ProviderBackgroundandExperienceReviewedBy:

AnnualDueDiligenceReview PrivacyPolicy NDAonFile

SocialMediaReview OFACCheck 1099/W9

bookkeeping ongoing No 4/1/2016 uponnotification

no 3/1/2016 no yes 3/15/2016LinkedInandfacebook

3/15/2016 pendingW9

401KandProfitSharingPlan

Annual Yes 9/20/2011 uponnotification

yes NoInitialonlyNoongoing

1/28/2016 No 1/27/2016LinkedInandFacebook

1/27/2016 NA

BackgroundChecks

Ongoing Yes 11/7/2013 uponnotificationNonoticeneeded

yes No 1/28/2016 No 1/27/2016LinkedInandFacebook

1/27/2016 NA

TechnologySupport

Asneeded/EngagementLetter

Yes 5/14/2010 upon2weeksnotification

yes 2/11/2016 2/10/2016 Yes 2/11/2016LinkedInandFacebook

2/1/2016 yes

HealthCare/Dental

Annual Yes 10/4/2010StartDate11/1/2010

Renewsunlesscancelled


1/27/2016 no

database Annual Yes 12/1/2015 11/30/2016 no No 1/28/2016 No 1/27/2016LinkedInandFacebook

1/27/2016 yes

ERISAbond Annual currentbondpolicy

10/1/2014 Renewsunlesscancelled


1/27/2016 no

SecuritiesDealersBond

Annual currentbondpolicy

11/1/2015 11/1/2016 yes No 2/4/2016 No 1/27/2016LinkedInandFacebook

1/27/2016 no

EmailBackupandReview

3yearterm Yes 8/3/2012for3yearterm

Autorenewel1yearatatime.90daysnoticetocancel


1/27/2016 no

ManagerDatabaseAnalysis

AnnualEngagementRenewsautomatically

Yes 12/1/2014 11/30/2016 no No 1/28/2016 No 1/28/2016LinkedInandFacebook

1/25/2016 no

EmailHosting Monthly Yes 11/17/2010 Monthlyrenewsunlesscancelled


1/28/2016 no

AccountingSoftware

monthlysubscriptionfeerenewsautomaticllyunlesscancelled

Yes 1/8/2013 Renewsunlesscancelled


1/28/2016 no

FINOP Engagement30Days

Yes 11/1/2007FINOPEngagement4/23/2008ServicesStart5/1/2008

30daysnotice yes 2/11/2016 2/3/2016 Yes 2/11/2016LinkedInandFacebook

2/11/2016 no

OnsiteReviewAMLtesting

Engagement No Uponcompletionofservices

no 2/1/2016 2/10/2016 Yes 2/11/2016LinkedInandFacebook

2/1/2016 no

Phishingtestandtraining

annual No 9/27/2016 9/26/2017 No No 10/4/2016 No 10/4/2016 10/4/2016 yes

TesseraCapitalPartners,LLC Asof: 10/4/2016ThirdPartyServiceProviders

NameofProvider ServicesProvided

FrequencyofService/Typeof

Contract

Agreementonfile DateContracted Expiration AutoRenewel

ProviderBackgroundandExperienceReviewedBy:

AnnualDueDiligenceReview PrivacyPolicy NDAonFile

SocialMediaReview OFACCheck 1099/W9

BackgroundChecks

Asneeded Yes 11/01/2014 11/1/2016willrenewatcurrentrateunlesscancelornewcontract


1/28/2016 no

Fax Monthly NoMonthtoMonth

9/1/2012 Atwill yes No 2/3/2016 No 2/3/2016LinkedInandFacebook

2/3/2016 no

Office Annual Yes 9/1/2015 08/31/2017needtogive120daysnotice

no No No NoNorthForestdoesnothaveanyaccesstoconfidentialinformation

1/28/2016LinkedInandFacebook

1/28/2016 yes

payrollservices biweekly no 3/1/2016 Atwill no no 4/8/2016 no 3/16/2016LinkedInandFacebook

3/16/2016 no

junkmail/spamfilter

Annual yes 9/1/2016 9/1/2017 no No 1/28/2016 No 1/28/2016LinkedInandFacebook

1/28/2016 no

Databaseupdates

Annual Yes 5/28/2013 Renewsautomaticlyannuallyunlesscancelled

yes No 01/28/2016andconfidentiality

policyinagreement

No 1/28/2016LinkedInandFacebook

1/28/2016 yes

AnnualCEServices

Annual noinvoiceonly

1/1/2016 1/1/2017 no No 1/28/2016 No 1/28/2016LinkedInandFacebook

1/28/2016 no

RegisteredAgentProvider

annual noagreement.Seechangeofagentform&welcomeletter

9/1/2015 annual.Cancancelatanytimewithoutpenalty

no No 1/28/2016 No 1/28/2016LinkedInandFacebook

1/28/2016 no

CRMSoftware Annual Yes 12/15/2008 Renewsunlesscancelled


1/28/2016 no

Insurance AsperLeasingAgreement/annum

Yes 9/12/2016 Renewsunlesscancelled


2/1/2016 no

CreditCheck Ongoing Yes 11/17/2004 30daysnotice.Renewsunlesscancelled


1/28/2016 no

BackgroundChecks

Nocontract.Paybyrequest

No 1/31/2014 noneperusecharge

no No 1/28/2016 No 1/28/2016LinkedInandFacebook

1/28/2016 no

Legal HourlyEngagement/retainer

Yes 12/20/2010 uponnotification

yes 2/1/2016 2/11/2016 YesInagreement

2/03/2016LinkedInandFacebook

2/3/2016 yes

FinancialAudit EngagementAnnual

Yes 12/10/2015 Uponcompletionofservices

no 2/1/2016 2/19/2016 Yes 2/1/2016LinkedInandFacebook

2/1/2016 yes

SENIOR ISSUES RED FLAGS AND TIPS Monitor investor accounts for red flags of possible abuse such as:

Client stating that they have won a Lottery or wants to deposit their winnings into an account (Scams)

Client makes repeated calls for help resetting log-in credentials (Diminished Capacity) A Trusted individual is directing activity which is not normal for the account (Senior

Abuse) Client calls concerned because they have received a call from the IRS. (Tax Schemes)

Recent Investor Alerts issued by FINRA:

Plan for Transition: What You Should Know About the Transfer of Brokerage Account Assets on Death.

Sorry, this Ones Not a Winner: Dont Get Fooled by a Lottery Scam Binary Options: These All-Or-Nothing Options are All-Too-Often Fraudulent Tools of the Fraud Trade: Phones and Emotions

Registered Representatives with diminished mental capacity

Consider HIPAA Laws Develop Escalation Procedures Training on Red Flags

Uncharacteristic errors Unexplained cancelled trades Claims of unauthorized trades

Effective Practices Used to Protect Seniors:

Establish a Trusted Contact Placed Heightened Supervision on Accounts where a Registered Representative has

control over an account (require prior approval) Require reporting when a Registered Representative is made a beneficiary of an estate Appoint a Senior Issues Assistance Point of Contact Train Staff to Identify and Escalate Incipient Client Capacity (Outside Experts) Keep detailed Notes of Conversations Include additional people in meetings and calls with Seniors


421PenbrookeDrive,Suite12BPenfield,NewYork14526 (585)3643065 www.tesseracapital.com

OutsideBusinessActivityDisclosure(NewandExistingOBAs)

Pursuant to FINRA Rule 3270, all RRs of Tessera Capital Partners, LLC (TCP) are required todiscloseinwritingtothefirmanyoutsidebusinessactivitiesinwhichtheyplantoengageoutsideofthescopeoftheiractivitieswithTCP. RRsarerequiredtosubmitoneformforEACHOUTSIDEBUSINESSACTIVITY.

MANDATORYDISCLOSURE

IwishtorequestapprovalofaNEWoutsidebusinessactivityandWILLNOTENGAGEintheactivityuntilwrittenapprovalisprovidedbytheCCO.

Iwishtorecertifyoramendanoutsidebusinessactivitypreviouslydisclosedandapproved

bytheCCO.

IamcurrentlyNOTengagedinanyoutsidebusinessactivities.(SkiptoSection2) I amcurrentlyNOTengaged in anypassive investmentsor invest in anyprivate securities

transactions.(SkiptoSection2)

I wish to use this form to report a passive investment or invest in any private securitiestransactionsoutsidethescopeofTCP.(SkiptoSection2)

SECTION1BUSINESSDESCRIPTION

IherebynotifyTCPthatIamcurrentlyengagedinorintendtoengageinthefollowingbusinessorindependentactivitiesfromwhichImayderiveeconomicbenefit:BusinessNameunderwhichactivityis/willbeconducted:Myrolewiththisbusinessis/willbe(checkwhereappropriate):

Employee Officer Director Trustee Owner1 Other2

1 Ifanowner,mypercentageofownership=________%.Iflessthan100%,listotherownersandtheir%ownership

2 Ifother,pleaseexplain:

421PenbrookeDrive,Suite12BPenfield,NewYork14526 (585)3643065www.tesseracapital.com

DescriptionoftheOBA(includeawebsitefortheentity)InmyroleIhavecontroloftheentitiesassets: Yes NoThisactivityisInvestmentRelated: Yes NoIntendedStart/EndDates: Approx.timedevotedtoactivity/week: IintendtoseekinvestmentinthisbusinessfromcustomersorTCPorothers: Yes NoIfYes,submitadetaileddescriptionofyourintentionsonanattachedsheettotheCCO.

Iwillbecompensatedformyrole: Yes No

IfYes,pleasedescribeyourcompensation:

Percentageoftotalannualcompensationattributabletothisactivity:________________________Please list the names of any/all RRs, Employees, Clients or Prospective Clients of Tessera thatis/areinvolvedinanywayinthisactivity:

SECTION2ATTESTATIONI understand that FINRA Rule 3270 prohibits any registered person from being an employee,independent contractor, sole proprietor, officer, director or partner of another person, or beingcompensated or having the reasonable expectation of compensation, from another person as aresult of any business activity outside the scope of the relationshipwith TCPUNLESShe/she hasprovidedpriorwrittennoticetoTCPontheformitspecifies.If I am using this form to report a passive investment or an investment in a private securitiestransaction outside the scope of TCP, I have attached a current statement copy or relevantdocument(datedwithin90daysoftheformdate).IherebyacknowledgethatinformationIhaveprovidedonthisformregardingmyoutsidebusinessactivityiscurrentandaccurate.If the activity is ultimately approved, I agree to notify TCP of any material change(s) to thisbusiness,myroleorcapacityinthebusiness,oranyotherinformationofrelevanceonanongoingbasis._____________________________________ _________________________________ RRName(Printed) RRSignature

421PenbrookeDrive,Suite12BPenfield,NewYork14526 (585)3643065www.tesseracapital.com

ComplianceReview:

ThisproposedactivitywillbeviewedbyTCPscustomersorthepublicaspartofTCPsbusinessbasedupon,amongotheractors,thenatureoftheproposedactivityandthemannerinwhichitwillbeoffered

ThisproposedactivitywillinterferewithorotherwisecompromisetheRRsresponsibilitiestoTCPortoitscustomers

Thisproposedactivityshouldbeviewedasaprivatesecuritiestransaction

Thisproposedactivitywillcreateaconflictofinterest

Thisproposedactivityhasamaterialrisk

Theactivityproposedinthisformistobeviewedunder:

FINRARule3270(noninvestmentrelated)or NASDrule3040(investmentrelated)

Approval:

IapprovetheRRsparticipationinthisoutsideactivity.

IconditionallyapprovetheRRsparticipationinthisoutsideactivitybasedoncertainlimitationsorrestrictions.

IdoNOTapprovetheRRsparticipationinthisoutsideactivity.

CCOSignature Date

Current2016 Current2016 Current2016Name

OBANameOBADescription

StartDateInvestmentRelated?CompensationRec'd?

Doestheactivitycreateaconflictofinterest?

IsitlikelythatclientswillthinkOBAispartofTessera'sbusiness?

DoestheOBAinterferewiththeRR's

responsibilitytoTesseraorIsbusinesspartofTessera

business?AnyCommonClients?

ShouldtheOBAbetreatedasaPrivateSecurities

Transaction?Controlof3rdParty

MaterialRisk?LimitationsorConditions

OnU4?OriginalApprovalGiven

DatesofReviewReaffirmed?

Fieldsupdated(RedInk)Notes

OutsideBusinessActivityReview



MonthlyCertifications

ReportfortheMonthof ,201

For:

(AddRepresentativesNameHere)

THISREPORTISDUETOTHECCOOFFICERBYTHE10THOFEVERYMONTH.PersonalSecuritiesTransactionCertificationAllemployeesmustreportallsecuritiestransactions,regardlessofthesizeofthetransaction. Theonlyexceptionsare:securitiesissuedbytheUSGovernment,itsagenciesorinstrumentalities,moneymarket instruments,shares inExchangeTradedFunds(ETFs)andshares inopenended investmentcompanies(mutualfunds).Employeesaretomakereportsofpersonalsecuritiestransactionsmonthly.Withrespecttopersonalsecurities transactions each reportmust cover al