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FINRA Compliance

Developing a Successful Compliance Platform

Executives and compliance officers of smaller brokerage firms are burdened with regulatory controls that shift their time and focus away from developing products, services, and clients, to working tirelessly at staying on top of rule changes and compliance requirements. With all the time spent simply staying on top of changes and meeting requirements, it’s difficult to strategize and develop a program that compliments and benefits the business. In developing a strong compliance program, determine –  

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Mary Jo White SEC

Concern about Higher Standards in Enforcement Proceedings against Compliance Officers

NSCP letter to SEC August 18, 2015 expresses concern about higher standards in enforcement proceedings against compliance officers.

National Society of Compliance Professionals, in their letter dated August 18, 2015, states “Compliance officers are already highly motivated … and do not need the threat of enforcement action to do their jobs well.”

The letter comes on the heels of three important Administrative Proceedings where compliance officers are alleged to have “caused” a primary violation committed by another.  See Administrative Proceedings file numbers: 3-16591 (June 2015), 3-16501 (April 2015), and 3-15873 (March 2015). These proceedings portray a higher liability standard for compliance officers.  Whereas prior decisions reflect (i) a primary securities law violation, (ii) knowing or extremely reckless conduct, and (iii) substantial assistance to the violator.

As the NSCP points out in their letter, SEC higher standard applies 20/20 hindsight, a valuable resource in learning how to improve procedures and policies; but compliance officers work in real-time. Reviewing someone’s decisions ex-post record and concluding they should have known better at the time, sets a dangerous tone to fundamental policy. The “perfect policy” perspective fails to recognize that real-time decisions are rarely “perfect”.  Compliance officers navigate in a landscape where procedures are routinely re-examined and improved based upon lessons learned and new facts uncovered.

A question is, whether enforcement actions will further motivate compliance officers to greater vigilance, or risk demoralizing them into believing that even using their best judgment will not protect against risk of career ending enforcement action. NSCP is concerned that setting this stricter precedent may result in some of the best compliance officers exiting the industry rather than face new risks.

As an additional point, NSCP asserts that compliance officers do not generally operate the business for which they are hired. They are typically an advisory role. Compliance officers establish procedures or policies, but are rarely charged with administering them.  Administration rests on the head of executives and line managers. Holding compliance officers accountable for failures linked to implementation fails to recognize the limited scope of power within which many compliance officers operate.

While the NSCP is all for effective enforcement, they base their argument on a matter of fairness. NSCP asks that the SEC place more recognition on the limitations of compliance officers and the difficult landscape in which they make decisions. As noted, even the American Institute of Certified Public Accountants recognizes that controls are limited in nature and may not prevent or detect and correct all errors and omissions, as stated in SSAE-16 statement of standards.

Read the Letter

Does the SEC go too far in holding compliance officers accountable for violations committed by others?  


Sentry Compliance Software

Sentry Compliance Software – Scalable, Secure, 24-7 Access

Sentry Compliance Software Solution  Sentry Compliance Software

Phone: (818) 657-0288

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Sentry Compliance Software

Power up RND with Sentry: The Smart New Team Member

 

Sentry gives securities brokerage firms an integrated web-hosted solution to help manage compliance and risk. All in one place.

Maximize efficiency with Work-flow Automation for

  • Branch Audits

  • Outside Accounts

  • Risk Management

  • Conflicts of Interest

  • Suitability Assessment

RND Resources, Inc outsourced compliance team uses Sentry to help firms improve efficiency and reduce overhead by providing an easy way for managers to follow regulations and communicate securely with members of their firm and ours.

 

WorkFlow Communication | Designate tasks and communicate new policies quickly. Print workflow reports to manage timelines and due dates.

Work as a Team with your Software Partner

View dashboards for a birds-eye view of the compliance landscape or review charting trends and analysis to discover actionable insights. Advisors can look up status on new accounts, compliance, and suitability through the program as they follow up with investors. Download data to Excel and PDF for use in internal reports. Trade monitoring, insider information management, conflicts of interest, suitability tests, exception reports, and more make the compliance function transparent and reduce reliance on individual follow up.

 

Preset Dashboards

Control Access with Preset Menus & Dashboards

We build security in to the system by establishing preset menus with access only to  features applicable to job function. Dashboards show assigned and in-process compliance tasks and policy requirements. Share compliance calendars across the organization as well as a library of compliance rules, policies, and procedures.   

 

24-7 Access

Software-as-a-Service Secure Login Access, 24-7

Access the database wherever you go. Always be prepared with the information you need. Research data while in meetings. Conduct audits on staff and reporting while out of town at conference. Where ever you are, your compliance database is with you adding an extra layer of confidence and convenience.

 

Connectivity

Connect with Departments, Tasks, and Outsourced Compliance Teams

Keep an accurate and constant audit trail. Integrate compliance management between  advisors and investors. Stay on top of training and attestation.  Access pattern analysis, risk reports, and suitability reviews. Bring transparency to regulatory compliance and be ready for audits anytime. 

 

Improve Response

Improve Response Rates with Real-Time Feedback

Visually follow responses and task completion by support staff and employees. Use calendar features, alerts, and build customized reports to manage what you track, rather than track what you manage.  Our platform acts like a perfect assistant, keeping compliance teams informed of progress and outstanding items on the to-do list. 

 

Maximize Resources

Maximize Resources and Build Growth

By making compliance management flow faster and easier, managers are available for meetings and strategy planning. As you grow with our software service, you’ll be able to work on other tasks that require thought and planning while compliance runs smoothly.  Move ahead of the competition with a strategic competitive advantage in compliance support. 

 

Regulatory Updates

Regulatory Updates Customized to Fit your Firm

Complex and ever-changing regulations are time consuming to firms. More and more resources are required to keep up with new policies while less time is spent building the practice. Our Software-as-a-Service platform automatically builds in compliance changes and adds alerts, timelines, and calendars to keep you up-to-date.  This frees up managers to work on developing new policies and procedures that  improve efficiency.

 

Scalable Growth

A Scalable Solution

How will you benefit from our Scalable Solution? We’ll customize the software to fit your needs. As you grow, our software is fully capable of handling new services, programs, and policy changes. Add departments and divisions to meet your overall growth building strategies with out concern that compliance can handle the volume and changes. 

 

Certified Compliant

SSAE Type II Certified  and CSAE-3416 Compliance

SSAE-16 Type 2 standards are built in to the software. The SSAE standards assure controls of the system are suitably designed to achieve control objectives. CSAE-3416 applies to International standards of suitable audit controls and reporting requirements. As a compliance support firm we know the value and importance of building a compliance software as a service platform that is based on industry standards.

 

  • Your firm will benefit from a solution that connects outsourced compliance with your administration so managers will always know what is being handled.
  • Reduce cost of labor and management spent on compliance tasks by allowing the software to follow-up on tasks and provide reminders
  • Improve response rate and accuracy through automation. Free up time spent managing compliance tasks by creating workflows with automated reminders and alerts.
  • Always be ready for regulatory exams. Anytime. Get up-to-the-minute tracking of policy changes provides an on-demand audit trail whenever its needed.
  • Our outsourced compliance support will keep the program updated with relevant regulatory changes providing better work-flow automation while we work to identify and adjust for the regulatory landscape.

Trade Compliance: Track trade analytics, risks, and market data, all in one place.
Branch Management: Add and follow Calendar to-do items to keep on-going oversight.
Compliance Dashboard: Sort, add, and manage compliance tasks by priority.
Regulatory Reviews: Transparent audit trail tracks regulatory changes to compliance.

Trade Compliance Branch Management
Compliance Dashboard Regulatory Reviews

Watch the Video and See how easy it is to use Sentry

Get more information and request a customized demo. Complete this form or call (818) 657-0288

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SEC and FINRA 2015 Exam Priorities

SEC and FINRA have recently announced the priorities for their 2015 examination programs.  The priorities are divided into 4 categories:  a) retail investors; b) market wide risks; c) data analytics; and d) other areas.

Retail investors: In consideration of recent industry trends, including the fact that registrants are developing and offering to retail investors a variety of new retirement products and services, the program will focus on 4 key areas that tend to center on retirement accounts:

  • Fee arrangements:  The program will focus on recommendations regarding account types and if they are in the best interest of clients, including the fees charged and the risks.
  • Sales practices:  The focus will be on the sales approach used regarding the movement of retirement assets from employer plans to individual accounts, including the fees charged and the risks.
  • Suitability: The staff will focus on recommendations and determinations to invest retirement assets into complex or structured products and higher yield securities including due diligence conducted, disclosures made and the suitability of recommendations.
  • Branch offices: In this area the staff will focus on supervision issues and use its analytics to assess deviations from compliance practices.

Market-wide risks: Focus will be on structural risks and trends that can impact multiple firms or an entire industry. Areas of focus include:

  • Large firms: In conjunction with Trading and Markets the program will focus on the largest broker-dealers and asset managers to assess risk at individual firms and across industries.
  • Clearing agencies: All agencies assessed as systemically important will be examined using a risk based approach.
  • Cybersecurity: Building on an initiative started last year, the program will focus on compliance and controls.

 

  • Execution: The program will focus on potential conflicts involving payments or credits for order-flow and the duty of best execution.

Data analytics: Enhanced analytics will be used to assess the potential to engage in fraudulent and/or other potentially illegal activity including:

  • Recidivists: This involves the identifications of those with a record of misconduct.
  • Microcap fraud: Identification of brokers and transfer agents that may be involved with microcap fraud such as market manipulations. Enforcement also has a microcap fraud task force which focuses on these areas.
  • Excessive trading: The focus here is on clearing and introducing brokers to identify excessive trading. This complements the retail issues listed above.
  • AML: This will focus on clearing and introducing brokers that have not filed SARs or have filed reports which are incomplete and brokers who permit deposits of cash or direct access to the markets.

Other areas: Other priorities for the Division include municipal advisers, proxy services, never before examined investment companies, fees and expenses in private equity and transfer agents.

FINRA: Will focus on the sale and supervision of interest rate sensitive and complex products, transactions centered on wealth events for investors and cybersecurity, including platforms that interact with the markets. In addition, FINRA identified the following five broad areas of focus:

  • The alignment of firm and customer interests;
  • Standards of ethical behavior;
  • The development of strong management and supervisory systems;
  • The development and marketing of novel products and services; and
  • The management of conflicts of interest.

For further information please feel free to contact our office at  (818) 657-0288.