It’s that time of the year again! As the fourth quarter ticks by, we have compiled a helpful end of year to-do list to aid small broker-dealers in addressing and closing out important annual compliance requirements.
Beginning in 2017, the United States Security and Exchange Commission (“SEC”) initiated a series of examinations aimed at compliance policies and procedures regarding individuals within these firms that had a prior disciplinary history.
If you are a broker dealer or a supervisor at a broker dealer, I’m sure you have come across the terms Written Supervisory Procedures, Supervisory Procedures, and Compliance Systems. How many of you really know the difference, and before your eyes glaze over the rest of the article, how many of you know how to properly execute these concepts…. I’ll wait…….
Great! Now that I have your attention, there is no need to panic. The following post will walk you through the differences, some key concepts, practice pointers, and other factors you need to be aware of.
Last month, Stephens Inc. was censured by FINRA and fined $900,000 for failing to properly supervise “flash” emails sent by its research department. According to FINRA Rule 3110, firms must have supervisory procedures established which include procedures for the review of incoming and outgoing written (including electronic) correspondence and internal communications relating to the member’s investment banking or securities business. The issue began when Stephens Inc.’s research analysts sent flash emails to the sales and trading personnel. Although the research analysts sent the flash emails internally, the lack of supervision created the risk that material non-public information may have been included in the emails which could lead to misuse by the sales and trading personnel.