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News June 13, 2005 Issue

NASD’s Fingerprinting Best Practices

If your firm fingerprints new employees, take a look at NASD Notice to Members 05-39. The notice, issued late last month, sets out a number of suggested "best practices" designed to ensure that the person being fingerprinted is the same person who is being hired.

Although advisory firms are not subject to the same fingerprinting requirements as broker-dealer firms, some states and jurisdictions require that advisory firms submit fingerprints of their investment adviser representatives as part of the IAR registration process. For example, Arizona, the District of Columbia, Florida, Maine, and New Jersey each appear to require fingerprint cards from IARs. As with all things blue-sky related, your best bet is to call the state to confirm. (See NASAAís website for a handy list of phone numbers.)

Of course, state requirements aside, some organizations routinely fingerprint new employees as part of their general background check procedures.

Firms can either do their own fingerprinting or send applicants to a third party to be fingerprinted. For firms that go the third-party route, the NASD suggested that firms consider requiring applicants to be fingerprinted at a local law enforcement office or providing applicants with a list of acceptable third-party vendors that offer fingerprinting services. Applicants should be discouraged from attempting to fingerprint themselves, said the NASD.

The bulk of the NASDís guidance is applicable to firms that do their own fingerprinting. The NASD suggested that firms require the person being fingerprinted to present at least two forms of ID, right before the prints are taken. One of those IDs should be a valid driverís license, state identification card, or U.S. passport, with the personís picture. Staff should be trained on how to verify the authenticity of submitted ID. The person should be asked to submit a signature, to be compared to those on the IDs, said the NASD.