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Marketing Compliance Corner: Wholesaler Risk

Michael J. Wallace Esq.
Nov 19, 2013

Wholesale lenders may be held responsible for various actions of their brokers, bankers and correspondents (brokers). The wholesaler, in establishing a relationship with the broker, is responsible for due diligence. For example, the wholesaler may approve title insurance agents, appraisal companies and determine that sound underwriting/processing standards are followed. By underwriting the file or reviewing the underwriting, the wholesaler minimizes its risk. There are costs as well as competitive reasons that prohibit the wholesaler from reviewing every single commercial communication of its brokers. The wholesaler may directly compete via its own wholesale channel, competition with other wholesalers or lack of resources, any of which can lead to vulnerabilities. Yet some level of due diligence is required of the wholesaler to ensure compliance by its brokers. What steps should a wholesaler take to minimize these risks? We suggest the following to reduce your exposure: 1. Provide compliant marketing pieces, social media posts and commercial communication directly to your brokers. 2. Inquire about the compliance management system (CMS) the broker has in place: a. Receive assurance that the broker actually uses the system; b. Obtain a copy of the CMS in place for marketing and lead production, review it, and if necessary, provide comments to the broker; and c. If there is no formal CMS in place, have the broker provide a written narrative as to how it operates regarding marketing and leads. 3. Provide a written policy to the broker regarding your expectations and requirements and have a copy signed by the broker for your files. 4. Establish a consistent review (maybe quarterly) of the processes to ensure that the company does follow its CMS. 5. Determine the following: a. Are the broker’s Web sites approved by state regulators? b. Determine the manner in which the company obtains its business, such as direct mail, telephone, social media, etc. c. Are loan originators allowed to have their own Web sites and social media sites? d. Are policies in place in regards to Web sites and social media sites? e. Are the loan originators or other broker employees allowed to have individual e-mail addresses (such as Gmail or Hotmail) or are they required to use company e-mails only? You can manage risk with your wholesale channel by implementing some or all of the provided suggestions. Please feel free to contact me with any questions or comments at (727) 474-0961 or e-mail Michael J. Wallace Esq. is president of CLIX MG. Marketing Compliance Manager (MCM) is a Web-based compliance management system for marketing and lead programs, including social media. For a 15-minute live demonstration, please visit He may be reached by phone at (727) 474-0961 or e-mail
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