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Did you know that September is National Preparedness Month? Emergencies can happen at anytime and anywhere. Ready Business is a resource that assists businesses in developing a preparedness program by providing tools to create a plan that addresses the impact of various hazards. Preparedness is the key to ensuring that your business will continue after a disaster.
In light of this national observance, our blog is focusing on preparedness and preparing for an audit. We understand that the arrival of FINRA examiners at your firm may cause some concern—especially if it’s your first examination, or if it has been a while since your last audit. How can I help my firm prepare for a FINRA audit? Tell your staff about the audit. This also helps those staff members that FINRA needs to contact, identify and prepare the records and information that they need to have available when the audit begins. Review past audits. If your firm has been audited in the past, it is worth reviewing the last audit report. Often past audits have recommendations for improvements. In conducting routine audits, FINRA’s purpose is to identify opportunities for improvement, which are in the best interests of the firm being audited and their clients. Identify an audit contact person who can act as a liaison person to work directly with the auditor. This staff member should be responsible for ensuring that auditors have access to records and files or any other resources needed to complete the audit. This person acts as the main point of contact as the audit progresses so that FINRA can continue to keep your firm informed of how the work is going. Your firms’ contact person may find it useful to schedule meetings with FINRA periodically throughout the audit process to help monitor how things are progressing. This is a good way to facilitate communication, resolve issues on a timely basis, and correct any misunderstandings. Cooperation is essential to a successful audit. Depending on the type of exception, if your firm can demonstrate swift corrective action, it may not appear in the final Examination Report. Assemble appropriate and current information about your firm that you think might help FINRA in gaining an understanding of your administrative structure, nature of your operations, and knowledge of employee roles and responsibilities. Other information that might be helpful to have on hand could include key procedures or policies, organization charts and financial information such as budgets and sample management reports. Hot Topics. FINRA is really focusing on social media and cyber security preparedness as part of their audits right now. Are you prepared to respond (with proper documentation) to a regulator when they inquire with regards to your supervision preparedness? Are you finding everything that you are required to monitor? Do you know for certain that your employees have properly disclosed all OBAs? Being prepared to address these "hot topics" will help in the event that you are audited. A FINRA audit is an excellent opportunity to take a thorough look at the risks impacting your business and the controls put in place to mitigate those risks. Please note that these are only general steps recommended to prepare for an audit. We recognize that specific steps and information requests that are unique to your firm will be identified and communicated to you as you interact with auditors. Source: FINRA.org A firm was recently fined $150,000 by FINRA for not monitoring their registered representatives’ use of social media sites. Additionally, this same firm did not have a mechanism for determining whether its representatives were using social media for securities-business purposes. (full case details)
The social media monitoring applications available today rely on an honor system. Companies must trust that their employees are reporting all the social media accounts with which they maintain and contribute. Unfortunately, there is a flaw in this system, not all representatives are so forthcoming with their social media accounts. When it comes to social media how do you know that you are monitoring all of your reps’ accounts? Our Eagle Eye clients are continually finding social media accounts that have not been reported, as well as identifying other things like undisclosed OBA’s, websites, and blogs. Eagle Eye's multi-query processes and dynamically designed algorithms provide more accurate results when monitoring the web. Eagle Eye saves time by eliminating the process of sifting through endless pages on Google or Bing when you are trying to monitor your advisors by hand. (Schedule a demo and we can show you in person how it will work for you.) One of our clients found after implementing Eagle Eye, they immediately identified several OBAs and many missing social media accounts that their reps had failed to report. Now after utilizing Eagle Eye for the last couple of years, not only are they able to continually monitor their reps for new issues, but their reps have become more forthcoming about reporting their OBAs and social media usage. Eagle Eye is just a fraction of the cost of a FINRA fine, and it was developed because of the feedback and requests that SiteQuest Technologies received from our clients. Not only does Eagle Eye identify and locate your representatives’ online presence but it also helps you document and report on your findings. With just a click, you will have everything you need including when a result was found, who reviewed it, comments that were made and time stamps on every action taken on the account. Make sure that you are not missing anything that you are required to monitor. Contact us today for a demo! A company from Virginia was recently expelled from FINRA membership earlier this year for several violations. Some of the FINRA findings included; “That the firm included issuer communications on its website that it knew or had reason to know contained untrue statements of material facts or were otherwise false or misleading.” If a claim is filed against your company for posting statements on your website that the claimant said is misleading or untrue, are you able to defend your company? Do you have the documentation and reports to support your response? Our SQWatcher application is a web-based tool that not only archives your website, but also analyzes it each day. SQWatcher creates readily accessible backup files that can be easily retrieved to immediately identify and fix something that could have gone wrong. It’s also important to note that unlike other archival systems that may only take a screenshot to show you what the website “looked like” in the past, SQWatcher collects the actual HTML code for every page on your clients’ website(s). This provides the ability to not only view the page in question, but also browse the rest of the site as it appeared in the past as part of your review process. Are you responsible for monitoring one or more websites for your company? This can become a daunting task for any financial supervisor with the continual changes and updates. Are you notified when website information is updated so that you can review and ensure that the changes made online are correct? SQWatcher has taken this into account so that you are automatically notified. This same Virginia firm was also cited by FINRA for “not reasonably supervising its activities of those of its associated persons.” Our Eagle Eye product is the first of its kind application that is designed specifically to help the financial industry easily and effectively supervise the web. Eagle Eye automatically searches, documents, and reports on your web supervision responsibilities so you have everything you need to find and address issues before they are brought to your attention by a regulator.
Eagle Eye and SQWatcher working together are a force multiplier in your supervisory scheme. The cost of these applications are just a fraction of the cost a fine. Working in the finance industry for over 15 years SiteQuest Technologies is an innovative partnership for your firm. We work closely with your supervision departments making sure that our products are continually evolving and optimized with your concerns in mind. Contact us today to see how we can assist you in your web supervision needs. In December, 2016 a firm in the Midwest was fined $12,500 from FINRA. FINRA found that the firm failed to provide evidence an adequate review of disclosed outside business activities for its registered representatives in outside business activity questionnaires submitted by the registered representatives. The findings also stated that the firm’s WSPs stated that the firm would review firm and registered representative websites monthly, and that the review will be evidenced in the firm’s Supervisory Journal. During the course of a three-month review period, the firm’s Supervisory Journals failed to contain documentation of any review of firm or registered representative websites. Have you heard of SQWatcher? It stands for SiteQuest Watcher. SQWatcher automatically scans, monitors, and archived the websites that you are required to supervise. Unlike other archival systems that may only take a screenshot to show you what the site “looked like” in the past, SQWatcher collects and documents the actual HTML code for every page on your clients’ website(s). This provides you the ability to not only view the page in question, but also browse the rest of the site as it appeared in the past as part of your review process. Do you have difficulties monitoring your representative’s outside business activities? Eagle Eye is a first of its kind application that is designed specifically to help the financial industry easily and effectively supervise the web. Aiding in your ability to find and document outside business activities. This time-saving solution automatically searches, documents, and reports on your web supervision responsibilities so you have everything you need to find and address issues before they are brought to your attention by a regulator. Eagle Eye and SQWatcher working together are a force multiplier in your supervisory scheme. The cost of these applications are just a fraction of the cost a fine. The average FINRA fine handed out in 2016 was $437,466. Contact us today for your personalized demo so that we can demonstrate how these programs will benefit your firm.
We continue to review the monthly disciplinary actions that are reported by FINRA and we are regularly finding rulings and fines that could have been prevented through the use of our Eagle Eye platform. In November 2016, a firm was fined $5,000 from FINRA after it was found that the firm failed to conduct a review of preexisting activities of outside business activities associated with the registered representatives. The findings also included that the firm was unable to provide a supervisory controls report for the years 2008, 2009, 2010 and 2011. Read the full report here. As you know, disclosures are not enough when it comes to Outside Business Activities which is why additional supervision is requested. Trying to discover any outside business activities with just a basic search engine can be very time consuming. Sifting through all of the pages of irrelevant results makes it even harder to find applicable information. Our multi-query processes and dynamically designed algorithms provide more accurate results for review. A compliance professional from a broker dealer in the Midwest said that, "The Eagle Eye Surveillance system has been a force multiplier in my firm’s supervisory scheme. This simple tool has transformed my internet surveillance sweep process from a time-consuming, multi-day enterprise where I view the same search results over and over to a simple process that can be completed in a couple of hours." Additionally, our clients say that the automated reporting features that Eagle Eye provides dramatically reduces their workload as well. Our compliance designed reports have everything you need including when a result was found, who reviewed it, comments that were made and time stamps on every action taken on the account. You will have everything you need to respond to a regulator with just a click, and the ability to export it as needed.
Contact us today for a demo to see for yourself how this product can assist you. |
About James CellaJames Cella is the President of a growing and innovative compliance technology provider called SiteQuest Technologies. James is a customer-centric individual and focuses on building and sustaining positive and lasting relationship with his clients and partners. James and his family are "super fans" of Utah Football and have attended nearly every home game since 2002. Go Utes! Archives
July 2019
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9/1/2017