The loss of a key senior professional is significant at any time. The significance is heightened when the departure takes place shortly before a regulatory audit. One company was faced with this situation with the departure of its Chief Compliance Officer within two months of a regulatory audit. Right after the departure of the individual, the regulatory body contacted the firm indicating they would be conducting an examination of the broker/dealer. Unsure of all of the processes, actions, and information of the compliance department, an executive of the firm reached out to FIC for assistance.
Our Methodology and Processes
FIC immediately sought to have a meeting with the firm’s executive to gain a better understanding. We were able to gain a high level of knowledge about the activities of the firm, the nature of communications with the regulator to date, and some potential areas of weaknesses. However, it was also clear that senior management did not know of all of the actions that had been undertaken by the former Chief Compliance Officer or where all books and records documenting such actions were.
We subsequently provided a proposal to the firm to address their needs. The proposal laid out an action plan to prioritize what needed to take place prior to the regulatory examination to address inquiries, records requests, and compile records. Prior to the examination, we undertook the following steps:
- Addressed inquiries prior to the examination
- Determined what records were adequate, had weaknesses, or otherwise non-existent
- Compiled records to be available during the examination
- Determined, through conducting a mock audit, weaknesses in the firm’s processes and compliance with applicable regulations
- Provided guidance and training to the executive and personnel about applicable regulations and typical areas of focus and discussion during an examination
Our firm continued to assist the company with guidance and assistance throughout their examination at the request of the company executive.
The company, with the assistance of FIC, was able to successfully address and navigate the regulatory examination. Senior management of the company was pleased with the results of the regulatory examination as the company had fared better than initially expected. The company also had been able to implement, with the assistance of FIC, a number of actions to ensure compliance with applicable regulations going forward. Overall, the firm had a much stronger compliance and operational foundation in place after FIC had completed its work with the company.
How Can FIC Help?
Broker/dealers and investment advisers frequently seek the assistance of FIC in regulatory examinations and/or providing outsourced solutions. The scope of any such engagement is tailored to the needs of the particular client so that any issues or needs are addressed. A few of these services offered in connection with regulatory examinations are: mock audits, assistance with regulatory responses, and pre-examination preparation services. For outsourcing services, we offer the ability to serve in various principal capacities (i.e. FINOP, Municipal Principal, etc.), compliance and audit reviews, the preparation of compliance policies and procedures, and many more.