Why Broker Feeds Are Such A Compliance Game Changer
Increased speed. Increased ease. Increased accuracy. Decreased risk. This week we go in-depth on broker feeds—and all the benefits they bring—with Star’s broker-feeds specialist, Pippa Hainey, as our guide
At StarCompliance, there are lots of ways to get employee trade data reliably ingested into the STAR Platform, but broker feeds top the list for speed, ease, and accuracy. “Simply put, a broker feed is an automated way of having your employees’ transactions, positions, and accounts populated in the STAR Platform. Importantly, it removes the need for manual entry by a firm’s compliance team.” So offered Pippa Hainey, Associate Director of Data Feeds at StarCompliance. In this week’s StarBlog, we go in-depth on the subject of broker feeds—how they reduce firm effort as well as firm risk—with Hainey as our guide.
LETTING THE SOFTWARE DO THE WORK
“Before there were broker feeds, employee trade data came in one of two ways,” says Hainey, “mailed paper statements and emailed PDF statements. From there, someone at the firm would have to manually input the data into the compliance platform in order to reconcile reported employee trade data with what trades were actually executed, as recorded by the employee’s broker-dealer.” Fundamental to the compliance function, the trade-data reconciliation process ensures monitored employees aren’t trading in securities that could cause a conflict of interest.
Manually inputting employee trade data is a perfectly valid way of reconciling activity, but it’s time, attention, and labor intensive. Picture a compliance officer sitting at her computer—a hard copy of an employee statement physically spread out in front of her, or a PDF displayed electronically on a second monitor—scanning back and forth, picking out pertinent data, and then typing it into the firm’s compliance platform. She must be focused enough at this portion of her job to do it right, but fast enough so it doesn’t overtake her other responsibilities: like doing the kind of follow-up and investigative casework that keeps compliance risk of all kinds to a minimum.
Now imagine that our hero is working at a big firm, with thousands or even tens of thousands of statements that need entering, every month. To keep up, her firm would need either a massive compliance team that could handle such a load or a dedicated data-entry department trained to do the work. Or, it could automate the process. Hainey: “Automation can mean different things, even in as niche a world as financial compliance. In this case, automation means ingesting trade data by means of a broker feed and then letting the compliance software do the work of reconciling employee positions.”
MAKING COMPLIANCE MORE EFFECTIVE
Star currently has around 100 broker feeds in place, plus hundreds more available through clearinghouses. But what if an employee executes his trades through a broker-dealer that doesn’t offer a feed? Hainey: “A big part of our job is establishing new feeds. We have to reach out to the broker and find the right person to speak with, and it can take some time, but it’s in everyone’s best interest that we do it. For Star, the more feeds on offer, the better; it’s a great selling point. More importantly, though, establishing a new broker feed for a client is another way to make compliance simple and easy for them, which is Star’s mission.”
Broker feeds also make the process of monitoring personal trading more timely for Star clients. In the world of paper and PDF broker statements, compliance departments are getting employee trade data once a month. Broker feeds mean that same data comes in far more often—typically every 24 hours, five days a week—which means reconciliations can happen far more often, and any inconsistencies or anomalies can be more quickly brought to light. That increased frequency translates into real risk reduction for firms. And broker feeds don’t just mean more data more often, they mean more accuracy. Hainey: “With broker feeds, the human-error element is removed because the trade data is automatically exported from one system, put into a flat file, and then automatically imported into STAR. If there’s anything out of place, the row is discarded and an error is reported. These errors come to my data-feeds team first. They do some preliminary triaging checks, and then raise a ticket if there’s a bigger issue. If required, the error is escalated to myself for development attention. We also, of course, are automatically made aware by the STAR system if an expected file simply hasn’t arrived. ”
And Star’s broker-feed capability is only set to get better. Hainey: “We’re always trying to make the broker-feed process as seamless as possible. At the moment, we’re exploring new technologies for ingesting data, which means a better user experience for our clients while also allowing us, the Star team, to react more quickly to changes in broker-packages. Broker feeds certainly aren’t new, but the way we put them to use for our clients is fairly unique. Certainly, Star offers a very broad, international offering of broker feeds, and that number is always on the rise. I would say our broker-feeds—the timely way in which they deliver data and their international reach—get the attention of prospective clients.”
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