Reporting Tips For Principal Brokers A survey recently completed by RIBO Financial Investigators shows a number of common errors made by brokers when completing Financial Position Reports. The following comments and examples may assist you: Cash on Hand and Bank Balances Brokers often report the account balance shown on the bank statement without adjustment for outstanding cheques not cashed as of statement date. Frequently, bank accounts and cheques are not identified as "trust account" as required by RIBO regulations. Total Premiums Receivable Many receivable totals are overstated by including pre-billed items (premiums for policies with effective dates occurring after the reporting period). These figures should not be included (they are particularly misleading when the corresponding net amount is not reported in "payables"). Anticipated direct bill/payment plan commissions should not be included as "trust" receivables. Premiums Over 90 Days The "over 90 days" figure reported should not be adjusted for post-dated cheques unless this is done in accordance with the guidelines which were published in the December 1991 Bulletin. Outstanding premiums owed by the broker, or by shareholders or other related parties, are not being reported. Regardless of due date, some brokers report premiums in the "over 90 days" category only when they consider them as bad debts. Investments Held in Trust A number of trust investments do not comply with all requirements of Reg. 991, S.1. For example, trust investment documents are not always in the name of the broker business as they should be. Others are not identified as being held in trust. Many documents are not redeemable on demand as required by the RIB Act. Contrary to the RIB Act, trust assets have been used as collateral or pledged as security for a bank loan. Most bank managers realize that foreclosure against broker trust assets are specifically excluded from any assignment or pledge document. Payable to Insurers or Other Brokers Amounts owed to insurers are improperly reduced by the amount of direct bill or monthly payment plan commissions expected from insurance companies. In some cases brokers report only the company billings for the two months proceeding the reporting date even if they owe some or all of the prior month accounts to some insurers. Non Insurance Accounts Receivable This is the section where anticipated direct bill/payment plan commission income should be reported. Equity Loans Loans from shareholders should be documented. As indicated in the March 1991 Bulletin, there should be clear indication arrangements made to keep funds in the business until there has been an opportunity to build other equity. Examiners have found instances where brokers have failed to report loans made to shareholders. General Frequently we find insufficient books and records, or books and records not kept up to date so that trust positions cannot be calculated. In some cases, aged accounts receivable listings are not produced on a regular basis. In others, they have been discarded. Some brokers overlook the requirement that accounting records must be retained for the six years prior to the most current fiscal year end.