Posted by Marjorie Forestal, Mike Jamroz and Vishal Kumar on August 31, 2015.
On July 14, 2015, the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) hosted the National Compliance Outreach Program in Washington, D.C., to help compliance, audit, and risk officers of broker-dealers better understand how they can improve their firms’ compliance with laws and regulations. Speakers and panelists included SEC and FINRA leaders and compliance executives from leading firms. Below are some of the key takeaways:
Accountability of firm senior executives and compliance officers
Panelists emphasized that C-level executives and the board should commit to their firm’s compliance frameworks, including creation of procedures for dealing with conflicts of interest and proper escalation to senior management to help deter potential actions for violations of policy, laws, or regulations. The panelists noted that while the SEC does not intend to target compliance professionals, there will be an increased focus on the duties of compliance professionals and Chief Compliance Officers (CCOs).
Firms can help deter cyber threats by implementing multi-step verifications and encryption on all data. The panelists noted that leaders should be aware of clients who prefer convenience and may be lax in securing their accounts; criminals are persistent and thorough in their search for an opening. The CCO and firm management should be actively involved in creating an effective cybersecurity prevention plan, as well as detailed policies and processes for handling a potential cyber attack.
Anti-money laundering (AML)
Panelists noted that the average number of SARs filed by firms per year is low (an average of five SARs per firm) because many firms do not file SARs at all. Additionally, many SARs filed are incomplete or done so incorrectly. The panelists stressed the importance of filing suspicious activity reports (SARs), as well as the need for compliance professionals to be vigilant in confirming that SARSs are filed and are completed accurately.
Firm and branch supervision and sales practices
In addition to diligent supervision of employees working in remote branches and from home to confirm sales practices compliance, panelists emphasized the importance of strong oversight and follow-through on Outside Business Activities (OBAs). To assist in monitoring OBAs, panelists recommended that compliance professionals should consider bringing a list of OBAs to branch examinations to update them and adding OBA keywords to the email lexicon.
Insights from SEC and FINRA examination programs
SEC and FINRA leaders explained that their organizations coordinate activities before an examination and share information on their examination focus and results to avoid duplication. They also explained that regulators occasionally request identical documents because they are looking at different areas. However, SEC and FINRA are currently working on implementing document sharing to reduce document requests.