Conflicts of Interest - A Big Area of Monitoring by SEC/FINRA

Broker-dealers and their registered representatives are an important part of the chain for reaching financial products to Advisors and through them to the investors. The conflicts of interest in the products / incentives for selling risky products to senior citizens, improper market disclosures have been high on SEC/FINRAs examination products.

Broker-dealers have challenges in identifying risky behaviour. There are a large no of branches and remote locations from which registered representatives operate. They have to be periodically audited and risks identified among them.

Managing this information in Excel and keeping track of risks across this large set of information is not the best way. An organized web based system is needed so continuous monitoring and risk identification can be done

SEC / FINRA Branch , Registered Representative Monitoring Expectations

Broker Dealers are mandated to conduct periodic comprehensive risk assessments and compliance monitoring across their branches , registered representatives and advisors to identify conflicts of interests in their behaviour, client complaints and any senior citizen abuse cases against them.

Advisors and Registered Reps report their Outside Business activities and U4/U5 to the FINRA’s Broker Check system which makes it public, so anyone can verify reported violations of the Broker-dealer or Registered Representative before engaging them. The Broker-dealer also has the responsibility of finding any other violations or conflicted outside activities that the Registered Rep has not reported

The Regulation Best Interest (Reg BI) regulation mandates registered representatives work in the “Best Interest of Clients”

GRACE Can help you manage Branch and Registered Representative Monitoring

GRACE Broker Dealer Compliance Management System provides you with a collaborative web based / tablet enabled / mobile system for the Compliance department, Branches and Representatives (Reps) to build a central repository of information with work flows and analytics to stay on top of all issues as they occur and mitigate them. It creates early visibility to stop them becoming a regulatory / reputation issue.

GRACE offers forms for staff online reporting of Outside Business Activities, Personal trades, Registration, U4, ADV, gifts and political donations, expenses, conflicts of interest, to the organization. It provides pre-approval and approval work flows, audit and findings to identify issues and risks. Policies and procedures, proper training and attestation ensure that registered reps and staff are aware and compliant.

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Broker-dealer Articles

05May 20

Frequently Asked Questions on Regulation Best Interest

03May 20

SEC’s Office of Compliance and Examinations Risk Alert on Exams related to Form CRS dated April 7th 2020

GRACE allows you to build the repository of Written Policies and Procedures through functions where you can add, update, review and release policies, procedures, manages versions and histories. GRACE provides access to the latest policy and procedure to the organization

Conduct Branch Audits

GRACE helps you set up all the branch information, including branch type, location, CRD Information,Registrations and filings, Office arrangements, personnel, products , types of activities , branch logistics, supervisory structure, registered representatives attached the branch, clients and complaints.
GRACE helps you set up Branch / OSJ (Officer of Supervisory Jurisdiction) examination calendars. You can also conduct online branch assessments and allow the branches to login and answer the questions relevant to them. In case of site visit the audit can be conduct on the tablet / mobile system with findings recorded on the spot. Issues and risks can be immediately flagged and Issue lists shared with the branch for risk mitigation.
GRACE can help you monitor progress of mitigation tasks and provide alerts on due dates, over dues and late dues in activities and tasks

Online Forms for Reporting

GRACE provides functions for Branch Staff and Registered representatives for online reporting of their Outside Business Activities, Personal trades, gifts political contributions, personal trades, expenses, conflicts of interests, U4, ADV and Registration Status

Compliance Management

The Compliance Management group can use the GRACE functions to review the various forms and information that branch staff and registered reps have sent to them and identify conflicts and raise issues and manage mitigation
They can verify Outside Business Activities reported by them against public information to see if there were any unreported information that raising issues and report them to FINRA as per the rules as well as follow up for mitigation
Compliance can also look at client complaints and identify and monitor remediation that needs to be undertaken and look at trends in branches and registered representative behaviour
Compliance can also look at the audit findings from branch and rep examinations and audits to identify risks and manage their mitigation

Online Attestation

GRACE helps set up templates for various attestations that Branch Staff and Registered Representatives have to attest, as well policy and procedure documents that have to be attested by them
Attestation requests can be set on line to them by the compliance officers. The person would receive email requests to let them know to come to their “My Portal” where they can see the Attestation request and could attest online
The Attestation Dashboard will allow the Compliance staff to monitor the status of attestation and send reminders for people who have not done their attestations.

Manage Branch and Rep Information

GRACE allows you to build repository of all branch and rep information including their state registrations, CE credits, products that are allowed for them to sell, their commission and fee information etc. to build a dossier on all the staff and reps across all the locations they represent the organization

Conduct Registered Representative Audits

GRACE helps you set up all the registered Rep information, including Registrations, Filings, Social Media Accounts, Documents and Contractual agreements, Outside Activities Reported, clients, and complaints. Outside activity feeds from Public data sources can also be brought in automatically to show the information against what was reported and issues and risks can be flagged
GRACE helps you set up Registered Representative examination calendars. You can also conduct online assessments and allow them to login and answer the questions. In case of site visit the audit can be conduct on the tablet / mobile system and record findings on the spot. Issues and risks can be immediately flagged

Outside Activity Information from Public Sources

GRACE can help you bring automated feeds from public sources on your branch staff and registered representatives to help the compliance staff identify unreported conflicts and violations
Information about them like Companies registered under their names, Litigations (Bankruptcy, Civil, Criminal, Appelate ), Bankruptcy,Liens and Judgements,Company Debt, and if the company is under any Sanctions Watchlists can be brought in as automated feeds and red-flagged to bring it to the attention of the Compliance officers.

Branch and Rep Dashboards

GRACE provides Branch Dashboards for senior management to monitor branches for all their activities. Branch Dashboard includes OSJ/Non-OSJ information, Statewise, No of rep wise breakdowns as well as examination calendars, their progress and no of risks identified by branches highlighted by color so senior management can quickly zero in on high risk branches. The Branch Dashboard allows drilldown to all details about that branch to see the details
GRACE’s Rep Dashboards can help monitor across Registered Representatives to see information on State wise reps, registrations, examination calendars, their progress and no of risks identified by reps highlighted by color so senior management can quickly zero in on high risk branches. It also has chart of all reps and their outside activity violations in case there are any and allows drill down to details.

Online Training

GRACE allows Training Calendars to be set up for all of the staff members and set up the training plans to ensure that all staff are properly trained
Online Training programs can be loaded and rendered online so reps can undergo their mandatory training online
Customized training for Reg BI,Product Suitability, Sales Practices etc can be set up and customized to the business and also rendered online
Training dashboard can give status of training by staff members in easy to use reports

Identify Conflicts of Interest Quickly

Ability to monitor branches and registered representatives on an ongoing basis and identify conflicts of interests and violations quickly

Ready information on each Branch and Registered Rep in a central place

A Central repository of information to track and manage Branches, Staff and Registered Representatives is of great value for organizations that are widely spread out across states and regions.

Ability to Track and monitor Violations

By having the powerful Branch and Registered Rep Dashboard, violations come to light very early to isolate and protect customer interests before they become legal liabilities, reputations issues and regulatory fines

Easy way to conduct Branch and Rep Examinations

By having a tablet enabled, mobile system, site visits of branches and offices and rep examination findings can be recorded right as they are happening and data is immediately available to the dashboard for identifying risks.

Ensure Compliance through Online Attestations

With the ability to set up and manage attestations to various activities and offering online attestation, “Culture of Compliance” can be established very quickly

Automated Integration to outside sources can help Compliance officers

By providing automated sources of information about registered representatives and staff , conflicts of interests can be identified by compliance staff without a lot of manual labor. Timely identification can help prevent customer complaints, litigation and enable customer protection

Establish Culture of Compliance

By providing a proper Control and Oversight mechanism across branches and reps and continuously monitoring them, you can establish the “Culture of Compliance” across the organization

Online Dashboards make for real-time monitoring

With an integrated web based access anytime anywhere, there is no need for risk reports to be generated All that effort, costs and time can be saved.

Regulatory examinations can be handled with confidence

Information gathering and report creation for regulatory audits is a very costly operation for all organizations. The GRACE system becomes the proof of good compliance management practice in the organization and save enormous amount of money in this data gathering and report creation process.

Organization Ownership of Data

Organizations suffer when key risk and compliance staff leaves. The information is scattered if maintained solely by individuals and are lying on disks in various forms. GRACE becomes the single central repository of documents, data and processes enabling continuity even when key people leave the organization

Improve Customer Confidence

By identifying and weeding out bad actors, the system will help build confidence in the organization with their customers as an organization that does right by them and will not tolerate bad behavior towards clients.

Enormous Cost Savings

Enormous costs savings in unwanted labor for audits and examinations, avoid regulatory fines, legal costs, reputation risks and empowers the organization in managing risks.