Last week FINRA held its annual Broker Dealer conference in Washington DC. It was one of the largest they ever had: 1300 attendees and completely sold out. What this usually means is that the BD community is scared and confused. The regulatory environment is changing and becoming more complicated on a daily basis.If there was a general theme, it was Culture of Compliance and Fiduciary Duty. Over the next few blogs, I will try to help you understand what is going on in these and other areas that were discussed at the sessions. The conference started with Rick Ketchum, FINRA CEO: “I can’t count the number of times … where a culture that doesn’t value ethical behavior has led to compliance failures for a firm and significant harm to investors.” That set the tone for his, and others’, remarks. They all relate to the five indicators that a firm needs to establish that culture.
- Does the firm proactively seek to identify risks and compliance events? This must be done hand in hand with the business silos of your firm. Analysis, testing and surveillance are keys to a successful compliance program.
- Whether policy or control breaches tolerated? Your WSP’s or P&P’s should describe the actions that will be taken in the event of a breach.
- Are supervisors effective role models of the firm’s culture? This is NOT a ”do as I say - not as I do” situation, supervisors must display the proper attitudes and be examples of correct and compliant corporate actions.
- Are the individual areas of the firm (branch offices, trading desk, investment banking) conforming to the culture that the main office and C-suite officers are establishing?
- And most importantly, are control functions valued within the organization?
