{"id":158,"date":"2019-04-24T17:13:59","date_gmt":"2019-04-24T17:13:59","guid":{"rendered":"http:\/\/securitiesregslawyer.com\/blog\/?p=158"},"modified":"2019-04-25T21:15:06","modified_gmt":"2019-04-25T21:15:06","slug":"youll-pay-big-if-your-written-supervisory-procedures-dont-cover-all-of-your-business","status":"publish","type":"post","link":"https:\/\/securitiesregslawyer.com\/blog\/youll-pay-big-if-your-written-supervisory-procedures-dont-cover-all-of-your-business\/","title":{"rendered":"YOU\u2019LL PAY BIG IF YOUR WRITTEN SUPERVISORY PROCEDURES DON\u2019T COVER ALL OF YOUR BUSINESS"},"content":{"rendered":"

Rule and Business<\/strong><\/p>\n

FINRA requires a brokerage firm to have written supervisory procedures (WSP) that cover all the businesses in which it engages. The Financial Crimes Enforcement Network of the Treasury Department (FinCEN) requires brokerage firms to have written supervisory procedures to comply with the Bank Secrecy Act and the anti-money-laundering rules thereunder (AML WSP).<\/p>\n

Good business practices dictate that a firm has procedures for its personnel to follow in conducting the firm\u2019s business.<\/p>\n

Enforcement and Business Costs<\/strong><\/p>\n

FINRA recently fined a broker $100,000,<\/strong> and had the broker undertake to rewrite its AML WSP <\/strong>to cover a significant line of the firm\u2019s business. [Tradition Securities and Derivatives, Inc., FINRA AWC No. 2015045334101, December 18, 2018]<\/p>\n

Damages.<\/strong> The firm will also suffer when an unhappy customer stops doing business with, or worse sues, the firm, and the firm either failed to follow its written supervisory procedures or didn\u2019t have any covering the business that the customer was doing with the firm.<\/p>\n

The Problem of the Off-the Shelf Manual<\/strong><\/p>\n

One problem is that too many firms buy compliance manuals off the shelf from \u201cconsultants\u201d and others that cover a multitude of areas, but not necessarily all of the lines of business in which the specific firm engages. Some of these \u201cmanuals\u201d run 100 pages or more. They give a false sense of compliance. \u201dYeah, we got a compliance manual that covers the waterfront.\u201d<\/p>\n

That may have been Tradition\u2019s situation. Yes. It had an AML Written Supervisory Procedure. But a major part of the firm\u2019s emerging market bond trading desk was trading in foreign bonds issued by Venezuela and Argentina. The firm had no procedures dealing with the various currency controls in these countries, the notices about these countries published by the Financial Acton Task Force and the State Department. Trading in these bonds by foreign financial institutions, usually in DVP\/RVP trades, were not triggered for review by the firm\u2019s AML WSP for compliance with the firm\u2019s Customer Identification Procedures, or Customer Due Diligence, or for review by the AML Compliance Officer. <\/p>\n

Worse yet is where FINRA has posted a model compliance manual such as it has done with the Small FIRM Anti-Money Laundering Template. These are generic form manuals. They don\u2019t cover many things\u2014such as the exemptions from the rules covered in the model, or reflect interpretations or many rule changes since the manual was prepared. These are general forms and may not reflect all of the lines of business in which the firm engages.<\/p>\n

Result<\/strong><\/p>\n

The result in this case was that the firm was fined, censured and made a costly undertaking.<\/p>\n

Comments; Discussion<\/strong><\/p>\n

Please feel free to contact me (email msimkin@securitiesregslawyer.com or phone 212 455 0476) with your comments or to further discuss this.<\/p>\n","protected":false},"excerpt":{"rendered":"

Rule and Business FINRA requires a brokerage firm to have written supervisory procedures (WSP) that cover all the businesses in which it engages. The Financial Crimes Enforcement Network of the Treasury Department (FinCEN) requires brokerage firms to have written supervisory procedures to comply with the Bank Secrecy Act and the anti-money-laundering rules thereunder (AML WSP). … Continue reading YOU\u2019LL PAY BIG IF YOUR WRITTEN SUPERVISORY PROCEDURES DON\u2019T COVER ALL OF YOUR BUSINESS<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-158","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/posts\/158","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/comments?post=158"}],"version-history":[{"count":4,"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/posts\/158\/revisions"}],"predecessor-version":[{"id":163,"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/posts\/158\/revisions\/163"}],"wp:attachment":[{"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/media?parent=158"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/categories?post=158"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/tags?post=158"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}