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Keep Current with Compliance - 4 Topics for June 2019

Compliance4 with Peter and Elizabeth Guarino

Compliance4 is dedicated to helping you build the foundation for a strong compliance program and a culture of compliance. Each month, we will provide 4 topics to think about with respect to your organization and in some cases, we will provide broader topic links back to SEC news releases, risk alerts and information to help you be your best with compliance.

Our 4 topics for June 2019 are: #SECfintech and SEC's Fintech Forum, SEC Best Interest, Creating and Enhancing a Culture of Compliance and SEC Risk Alert: Customer Records and 3rd Party Storage.

On May 31, 2019, the SEC held a Fintech Forum. You can search information using the hashtag #secfintech and the entire webinar is available on free replay here: The topic of discussion was the regulation of digital assets and distributed ledger technology (DLT).

2. SEC Best Interest

When making a recommendation of a securities transaction or an investment strategy involving securities, a broker-dealer must act in the retail customer’s best interest and cannot place its own interests ahead of the customer’s interests.

Regulation Best Interest imposes a new standard of conduct specifically for broker-dealers that substantially enhances the broker-dealer standard of conduct beyond existing suitability obligations. The standard of conduct draws from key fiduciary principles and cannot be satisfied through disclosure alone. It provides specific requirements to address certain aspects of the relationships between broker-dealers and their retail customers, including certain conflicts related to compensation.

The rules, forms, and interpretations will be published on the Commission’s website and in the Federal Register. The rules and forms will be effective 60 days from publication in the Federal Register and the interpretations will be effective upon publication in the Federal Register.

By June 30, 2020, registered broker-dealers must begin complying with Regulation Best Interest and broker-dealers and investment advisers registered with the Commission will be required to prepare, deliver to retail investors, and file a relationship summary.

3. Create and Enhance Your Culture of Compliance

Compliance4 believes that a strong culture of compliance is essential. One of our favorite sayings is “No employee at any level left behind.” Each month, we will offer a Culture of Compliance tip. This month’s tip is to evaluate the tone of compliance in your organization. The tone at the top is important, but what’s the "attitude in the middle"? Is there an attitude in middle where your compliance program is supported and effective? Do your front-line supervisors see detecting problems as their job (hindrance and not fun) or do they see focusing on the positive aspects of a job done right (fun and easy). A strong compliance program is only as good as its implementation and buy-in from your front line managers. We recommend a compliance health check up at least once a year and are happy to help you evaluate your culture of compliance and various programs.

4. SEC Risk Alert Customer Records and 3rd party storage:

The SEC issued a risk alert on May 23, 2019 about safeguarding customer records and 3rd party storage. During recent examinations, the Office of Compliance Inspections and Examinations (“OCIE”)∗ identified security risks associated with the storage of electronic customer records and information by broker-dealers and investment advisers in various network storage solutions, including those leveraging cloud-based storage. To review the risk alert visit:

About Compliance4

Compliance4 is a boutique regulatory compliance consulting firm based in Portland, Maine. We are  a leader in the compliance and regulatory services industry by offering expert compliance services and high quality comprehensive regulatory solutions.

We offer superior outsourced compliance resources and expertise, designed to be an integral part of our client’s daily operations, resulting in a stronger, more focused and competitive firm. We strive to help our clients succeed in a financial marketplace by providing customized, sensible and practical compliance solutions that fit each client’s evolving needs.

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