Increasing The Efficiency Of Your Compliance Program

Steve Brown

Head of Business Development

Proposed solutions to many of the pain points the modern compliance officer faces

At this year’s Star US User Conference, one of the highlights was Increasing The Efficiency Of Your Compliance Program. Moderated by Star’s Director of Product Strategy, Tim Ward, this in-depth breakout session was attended by compliance officers and STAR Platform users from across the country.

PAIN POINT: Managing, Recording, And Reporting On Violations

Discussion:
“Managing violations can be a real challenge. Not just the cases, but the violations, once they’ve occurred. We’re managing them on a spreadsheet right now. We need to be able to record the violations for a particular quarter and generate a comprehensive report. We need an abstract or a summary report, and we need it quarterly. It’s just a lot of manual work every quarter. Manual work that, frankly, I dread.”

Solutions:

Ensure that the system is configured to reduce false positives and limit the number of violations to the lower number possible for further investigation.
Use notes-and-attachments features within the case management workflow to record your investigation.
Use configurable case types to classify different types of violations to make reporting easier.

PAIN POINT: Handling Employee Brokerage Data

Discussion:
“We used to be at 90% electronic, which was pretty luxurious. But we’ve seen that level erode due to the proliferation of low-cost trading platforms, which aren’t in any hurry to establish expensive broker feeds. These are what many of the young employees, the new hires, are using.”

“One of the problems with paper statements is, by the time you get them you’re 30 days past the trade already. I mean, talk about real time? The employee has potentially inside traded in and out. That’s a problem. That’s crazy. That’s the cultural change that’s needed in financial compliance.”

“We have the 30-day problem with interns. Sometimes, by the time you get a paper statement, the internship is over and we have no leverage. For an employee you can say, we’re going to restrict your ability to trade. But the interns are gone so quickly.

Solutions:

Proactively generate reports to see which brokers your employees are using most regularly.
Maximize the number of broker-dealer feeds you receive electronically.
Collectively communicate with brokers (using Star as the facilitator) to encourage firms to supply an electronic feed.
Consider policy or process changes to reduce the handling of low-risk transactions.
Consider instituting a designated broker-dealer list, so employees will only be able to trade with those that provide an electronic feed.

PAIN POINT: Digitizing And Automating Incoming Data

Discussion:
“Digitalization of the data that all departments are using has got to be a challenge for everybody. There’s a lot of data coming in from a lot of different sources. We have to figure out a way to get this data into systems, like STAR, to be able to use it in an efficient and effective manner. I’m guessing that people are dealing with this issue in so many different ways, one of which is a lot of manual work.”

“I think automated, secure data entry will come about, but probably just for a subset of the paper-statement brokers you use. And then there still might be a review process, or even some manual data entry. If there are enough hours that go into the learning process for the automated system, then the balance can tip back to just doing it all manually. We could also see a hybrid process emerge.”

“We did a proof-of-concept with three data-entry providers. Some of the statements were very well structured, so those worked out well. They were easy to read and it was easy to pick out the required data. But other statements had missing data or too much variation in the presentation. There was little to no consistency as to what appeared where. It was difficult to know where to get critical information from.”

Solutions:

For non-designated feeds, consider asking your employees to upload their own documentation and to ensure their trades and holdings are complete.
Consider an outsourced statement-entry service.
Monitor industry progress of automatic/robotic solutions that could at least automatically categorize documents and pick out high-level information.

A little pain and work now can save days of recurring work over the year.

Steve Brown

As Head of Business Development, Steve Brown is responsible for helping drive growth at Star, with a focus on go-to-market planning, data and vendor partnerships, channel sales, new markets, and mergers and acquisitions. Steve joined Star in April 2021, and brings with him 25 years of experience advising financial firms on regulatory compliance. Prior to joining Star, Steve was Director of Broker-Dealer Client Services at Compliance Risk Concepts LLC, a senior director at PwC, and Head of Fixed Income and Capital Markets Compliance at U.S. Bancorp Investments, Inc. Steve began his career at Wachovia, where he was Head of Global Investment Banking Compliance and Control Group, and is considered a pioneer in the control room space—having established the bank’s first formal control room function.