SEC Chairman seeks inter-agency cooperation among regulators

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SEC Chairman Jay Clayton seeks interagency cooperation among regulators

Speaking at last week’s Security and Exchange Commission’s (SEC)National Compliance Outreach Program for Broker-Dealers in Washington, DC, SEC Chairman Jay Clayton reiterated the importance of regulatory coordination. Noting that the SEC shares the financial services space with a host of other regulators overseeing related and overlapping industries and market participants, he acknowledged that coordination is key to a well-functioning regulatory environment.

Regulatory 2 on 1 offense                                                                                                    

Clayton particularly focused on broker-dealer regulation, noting that strong coordination between the SEC and the Financial Industry Regulatory Authority (FINRA) has increased. “Coordination with FINRA is a particular focus for the SEC’s National Exam Program,” he said. “Effective and ongoing cooperation and information sharing with FINRA allows us to more effectively and efficiently deploy our limited resources to conduct examinations and promote compliance with the federal securities laws.”

He reported that the SEC Office of Compliance Inspections and Examinations (OCIE) staff regularly share exam plans and findings with FINRA, and also frequently meet with FINRA staff to discuss exam and other regulatory issues. These meetings, he added, include discussions of specific broker-dealers and registered representatives that have been deemed to be high risk.” So be ready.

Reiterating the importance of real-world contact with the entities it oversees, Clayton continued, ” Not only is coordination between and among regulators essential – but coordination and open communication between regulators and the industries that they regulate is also vitally important. To be effective in our jobs we must continuously invest in our knowledge and understanding of the markets and individuals we regulate. This current knowledge base is critical to us, and I expect a similar understanding of our concerns is important to [those in financial services] as well.”

Cooperation + whistle-blowing

Of course, just one week earlier, the SEC awarded two JPMorgan Chase & Co. whistleblowers a record $61 million. As reported by Bloomberg’s Neil Weinberg, the SEC, in letters, says the two will share the award which stems from bank’s $307 million settlement over conflicts in which JP Morgan Chase failed to disclose to wealthy clients that it was steering them into investments that would be more profitable to the bank than the investors.

Weinberg reported that JPMorgan agreed to pay $307 million, with $267 million going to the SEC and $40 million to the Commodity Futures Trading Commission (CFTC). The SEC wrote Wednesday that one whistleblower would receive 18 percent of the SEC portion of the settlement and the other 5 percent, which would translate to $48 million and $13 million respectively. The first award dwarfs the SEC’s previous top award of $30 million to an anonymous whistleblower in 2014.
Although Bottom of Form

The CFTC hasn’t made its whistleblower award determinations in this, Weinberg noted that the whistleblower receiving the $48 million award has also applied to the CFTC — which may delay the SEC decision as it opposes “a whistleblower receiving a ‘double recovery.’

JPMorgan, the largest U.S. bank by assets, admitted disclosure failures from 2008 to 2013 related to two units that manage money — its securities subsidiary and its nationally chartered bank — as part of the SEC settlement. The New York-based bank said that the omissions in its communications were unintentional and that it has since enhanced its disclosures.

Yes, Virginia, non-compliance can be costly

Better to be prepared and, of course, to do the right thing. Noncompliance can be costly, but compliance solutions don’t have to break the bank. Whether it’s the SEC, FINRA, CFTC, IIROC or your local State Regulatory body, you know your time is coming and you know reviewing your firm’s regulatory compliance exposure is always mission critical.

So let’s talk (212-233-1155). Ask about Patrina’s comprehensive, 8-module compliance solution and compliant data capture, file storage, and records archiving specifically designed for the financial services community. We’ve got you covered.

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