July 1999

Telemarketing Compliance in the Year 2000
How to Make Cold-Call Solicitations and Stay within the Law

By Alison Garfinkel
”Brokers beware.”

That’s how a recent article in Registered Representative began in discussing the latest legislation on mandatory no-call list laws enacted by the state of Georgia. Georgia became the fourth state to enact such a law, joining Florida, Oregon and Alaska.

Enforcement of the telemarketing laws on both the state and national level is getting to be very costly. Under the Federal, NASD and SEC rules and the four existing state laws cited above, the onus is on the Broker-Dealer to obtain the no-call lists and honor the request of call-averse consumers. The penalties for
non-compliance are severe. In Florida, the fine is $10,000 for each call placed to a person on the state no-call list.

Maintaining compliance is key. NASD penalties could result in disciplinary action as well as monetary fines. So, what must a Broker-Dealer firm do today to stay compliant with the law? A review of the major federal and state laws and regulations reveals a variety of compliance requirements for Broker-Dealers.

The Federal Regulatory Guidelines

The Telephone Consumer Protection Act (TCPA) was passed in 1991, and the Federal Communications rules and regulations implementing the act went into effect on December 20, 1992. The regulations imposed the following requirements.

-Limit telemarketing calls to the periods between 8 a.m. and 9 p.m.
-Maintain a “do-not-call list” and honor any request not to be called again. A request to be put on the list must be honored for 10 years from the time the request is made.
-Have clearly written “do-not-call” policies and procedures.
-If you are calling on behalf of another company, forward all requests to the company on whose behalf you are calling, because that company is legally liable under the law.

In 1994, additional legislation was passed in the form of the Federal Trade Commission’s (FTC)

Telemarketing Sales Rule-often referred to as “The Rule.” This law also requires many companies to maintain up-to-date “do-not-call” lists, and to pro- vide a copy of the company’s designated procedures for handling “do-not-call” requests to anyone who requests one. The consequences for non-compliance can be very costly. According to the FTC, calling a costomer who has specifically requested not to be called is a “Rule” violation, and the Broker-Dealer may be liable for a civil penalty, the fine for which may be up to $10,000 per violation.

Maintaining Cold-Calling Compliance with Federal Laws

At the Federal level, the requirements for maintaining compliance for Broker-Dealers and all telemarketers were outlined by Jerry Cerasale, the Senior Vice President of Government Affairs at the Direct Marketing Association, in a September, 1998 article in Corpus Juris. In order to offer consumers in-house sup- pression upon request, the law requires a marketer to:

- Have a written policy for maintaining a “do-not-call” request, and a procedure in place for maintaining the “do-not-call” list before any calls are initiated: The written policy must include:
-training procedures for making calls
-informing personnel of do-not-call procedures
-training callers to hear consumer’s requests
-recording the do-not-call request
-Establish monitoring and compliance procedures in order to:
-establish a time frame for deletion of the number from future calling lists
-implement list procedures
-transmit do-not-call lists to clients or incorporate into the seller’s list
-ensure that lists of persons who ask not to be called again are not transferred to any other entity without the prior expressed consent of the called party.

Broker-Dealer Compliance with State Laws

Just as you think that Broker-Dealer compliance issues could not become more complicated or involved, enter the state legislatures. Legislation and regulation of the industry at the state level are coming at a frightning pace. More than 150 bills have been introduced at the state level in 1999, and the year is not even half over.

Tyler Prochnow, counsel to the American Teleservices Association, identified six main regulatory areas in a May 6, 1999 article in the DM News. They were: 1. Registration and Bonding. The state requires Broker-Dealers to provide extensive information about their business, including financial information, scripts or other marketing materials. In most of these states, the registration and information must be accompanied by a bond in favor of the state.

2. Calling-hour restrictions. The most common are from 9 a.m. to 9 p.m. Some states prohibit calls on Sundays and holidays.

3. Do-not-call-lists. A state agency maintains a database of state residents who do not wish to receive telemarketing calls. Broker-Dealers are required to purchase the list from the agency, either quarterly or annually, and are prohibited from placing calls to residents on the list.

4. Ask permission to continue. Four states call for a Broker-Dealer to ask for the consumer’s permission before they deliver any type of pitch, message or marketing statement. Without permission, the caller must hang up without providing additional information.

5. Blocking of Caller-ID. The most popular bills prohibit the telemarketer from using any device or procedure to block caller-ID. However, these statutes could be read to include the use of a T-1 line or other equipment that does not transmit caller-ID information.

6. Written Materials. Almost every state requires some form of written material be sent to the consumer before the transaction is completed. The problem occurs when states mandate that specific language be used in written materials, with each state’s specific language being different than another one’s. Thus, strict compliance requires a number of different written contracts, specific to each state in which the consumer resides.


Telemarketing Compliance in the Year 2000 As we look back on the decade of the 90’s, a period Filled with more and more legislation being enacted at Both the federal and state level to try and achieve Broker-Dealer compliance, one can’t help but wonder If there is a better solution to the problem. As we enter a new millennium, what better time to take a fresh approach to solving the problems of Broker- Dealer compliance and invasion of consumer privacy.

Broker-Dealers, like all American enterprises, have the right to conduct their business in a professional and ethical manner. Consumers, on the other hand, have a right to their privacy, and should have the ability to choose whether or not they wish to do business with a Broker-Dealer or telemarketer, just as they have a right to decide on other suppliers of products and services. Now there is a product to address these needs called TeleBlock.

This is the first product available to automatically block phone calls to individuals and businesses on “do-not-call” lists. It ensures regulatory and statutory compliance for Broker-Dealer operations. This product is a perfect example of how leading-edge technology can be used to address and correct problems that, in previous years, more and more legislation have left unresolved.