S1:E12 | Lessons From The Front Lines - Examinations and Enforcement | Compliance In Context

Welcome back to The Securities Compliance Podcast! On today’s show, we continue our Lessons From the Front Lines series. Much like our regular shows, this series will provide same excellent content to help you put Compliance In Context™, but will deliver that content in a more narrative form—like a fireside conversation with an industry pro. In this way, the Lessons From the Front Lines series will provide you with practical advice and takeaways that focus on a real-life, tough lessons other compliance professionals and regulators have learned on the front lines of our industry. 

To help guide us through today’s show, we welcome in Ed Wegener, the former Senior VP and Midwest Regional Director of FINRA to discuss some real lessons learned on the front lines of the investigation and enforcement process.

Topics:

• Reviewing the life cycle of a regulatory investigation
• Analysis of findings from routine examinations, cause examinations or enforcement investigations.
• Use of data analytics in the investigation process
• Conclusion of the Investigation
• Referral to enforcement and escalation of findings
• Enhanced focus on the impact the supervisory process and requisite due diligence of products, OBAs, private transactions, borrowing from customers, etc.
• Discussion of policies and procedures and related training protocols
• How does the firm monitor for compliance with its policy?
• Reviewing the FINRA 2021 Annual Regulatory and Exam Priorities
• Industry innovations to enhance the process of investigations and enforcement

Quotes:

“When they do conduct an examination, they have been getting really good at taking that information that they gather through things like electronic blotters—putting that through their analytical systems and using that to identify areas of potential focus. And so the way we used to think about it was, it’s trying to find needles in haystacks and the analytics aren’t necessarily going to find the needles for you, but they're going to tell you that if there are needles they're probably in this part of the haystack.”

“I think as an examiner at FINRA, what I really want to know is not particularly what I find on the examination, but when I leave the firm, what are they going to be doing to make sure they have controls over the risks that I’m concerned about.”

“You know it’s interesting I’m not sure that Reg BI is changing the landscape in terms of that from the perspective of really understanding the products that you're selling. I think there's always been that expectation, you know whether it was reasonable basis—suitability requirement or the care obligation with respect to Reg BI but the important thing is that firms before they start recommending products that they understand those products. They understand the features and the risks and that the people who are selling them understand them as well.”

Resources:

Compliance in Context