FINANCIAL PROS WORKING FROM HOME INCREASES COMPLIANCE RISKS
In reaction to the appearance of the pandemic coronavirus, some financial consulting corporations are telling their employees to work from home. Market unpredictability, working remotely -- and the greater cybersecurity openness introduced by doing so -- together take firms into a very high zone of vulnerability.
In a financial firm, the chief compliance officer is the crucial person to help a firm avoid issues. But the logistics of that role change when advisers are working from distant places instead of under one roof and the CCO can’t wander the halls to check on colleagues.
President of FrontLine Compliance Amy Lynch said, “You’re counting on staff coming to you rather than you being able to discover [difficulties] yourself because you’re not tangibly present.” “If people are not in the office, you can’t tell if they’re working or not working and what exactly they are saying to customers.” Consulting firms must certify they’re able to oversee staff members who are working outside the office and must be able to archive communications between staff and customers.
Securities Compliance in the time of a Pandemic
The problem is that many firms are still using a paper-based submission system. “Compliance software is one of the slightest used types of software within the larger RIA industry,” Mr. King said.
Firms need to have the means to track email and social media collaborations between advisers and clients. They should also have audio and video-conferencing proficiencies, said Marianna Shafir, supervisory adviser at Smarsh, a provider of cloud-based information archiving. It’s a perfect storm, regrettably, for bad things to happen to your business. The peril of compliance issues and violations rises intensely.”
“Technology is really key right now,” Ms. Shafir said. “You want to make sure you have technology resolutions in place to arrest those exchanges. If you don’t have it at this point, you should be getting it on board.”
FINRA Sympathetic but Compliance Must Be Upheld
FINRA understands that the use of remote offices or telecommuting during a virus may require a member company to put in place other ways to monitor its associated persons, but it is the responsibility of the organizations themselves to ensure that compliance standards are uphold in order to protect investors from abuses of various kinds -- including everything from broker misconduct to cyber-fraud.
