Just last month, the Securities and Exchange Commission (SEC) issued another multi-million dollar fine for failure to enforce policies and procedures. The SEC announced that Citigroup Global Markets agreed to settle charges that it “failed to enforce policies and procedures to prevent and detect securities transactions that could involve the misuse of material, nonpublic information. The firm also failed to adopt and implement policies and procedures to prevent and detect principal transactions conducted by an affiliate.”
This failure to enforce will cost Citigroup $15 million, its penalty for its compliance failures.
Are you next?
Federal securities law requires every broker-dealer to take reasonable steps to prevent misuse of material
nonpublic information. The SEC’s investigation found that Citigroup did not review thousands of trades executed by several of its trading desks during a 10-year period. From 2002 to 2012, Citigroup personnel used electronically generated reports to review trades on a daily basis, but tech errors caused the reports to omit several sources of information about thousands of relevant trades.
How secure are your systems?
According to Andrew J. Ceresney, Director of the SEC’s Division of Enforcement, “Firms must ensure that they have devoted sufficient attention and resources to trade surveillance and other compliance systems.”
The SEC also noted that in addition to the $15 million penalty, Citigroup agreed to retain a consultant to review and recommend improvements to its trade surveillance and advisory account order handling and routing.
Who’s handling your firm’s compliance?
Stuff happens, so oversight matters. Regular internal reviews are important, but ensuring multiple “sets of eyes” are watching is even more important. As this tale of Citigroup Global Markets reveals, it’s not enough to have the right processes and procedures in place. Someone, or several someones, must be paying attention and watching over those processes and procedures.
Who’s monitoring your systems? Are you managing the process internally, externally, or both? Yes, you can do it all yourself. Or perhaps you might consider adding an independent set of eyes to your oversight team — a regulatory archival and compliance solutions specialist, like us? Ask about Patrina‘s comprehensive regulatory archival and compliance solutions specifically designed for Broker/Dealers, RIAs, and FCMs.
Let’s talk (212- 233-1155).