Opening Remarks at the Compliance Outreach Program for Broker-Dealers
Chair Mary Jo White
July 15, 2015
Thank you, Kevin, and thank you all for joining us today. It is my pleasure to kick off our annual broker-dealer compliance outreach program. Our goal each year is to share insights into the SEC’s initiatives and priorities and to continue our open communication and robust dialogue with you.
The work you perform as compliance professionals is critically important to investors and the integrity of the markets. You are on the front lines working to create, implement, and enforce a strong and comprehensive set of policies, procedures, and systems to govern and supervise firm employees. Your work helps ensure that investors are armed with the information they need to make fully-informed decisions. Importantly, you help prevent problems from occurring in the first place and, if and when problems do arise, you use those experiences to inform your future work to promote early detection and remediation.
Like you, much of our work at the Commission centers on protecting investors. We want to support you in your efforts and work together as a team. As an agency, we have tried to send a clear message about the importance of compliance to your boards and senior management, as well as the importance of strongly supporting you and compliance generally. Compliance and risk management must be an organization-wide effort and responsibility.
We know firsthand how challenging that work can be with limited resources. You may have heard me highlight the need for additional resources in general and especially for our Investment Adviser/Investment Company Examination Program. We also need more resources on the broker-dealer side, even when you consider our efforts combined with those of FINRA.
Transparency with the industry is a priority of our National Exam Program. We want you to know what our priorities are, where we see heightened risks to investors and the capital markets, and what issues we find most concerning. To promote that transparency, our Office of Compliance Inspections and Examinations has publicly released its priority areas for each of the last three fiscal years. We have also published risk alerts that highlight new initiatives and areas of focus, as well as sharing observations from examinations.
This year, for example, we published risk alerts that announced our Retirement-Targeted Industry Reviews and Examinations (ReTIRE) Initiative and alerts that shared examination observations from last year’s Cybersecurity Initiative. We publish these risk alerts, in part, so that compliance professionals can evaluate controls and procedures in these areas and make proactive improvements as appropriate. By doing so, problems can be addressed more quickly and before they get bigger, all to the benefit of investors, the markets, and your firms.
Our enforcement program also emphasizes the importance of a strong compliance program. We do this by highlighting in our orders situations where a compliance program operated effectively in identifying misconduct; by bringing enforcement actions when those programs have failed, particularly in the investment adviser realm where there is a specific requirement for compliance policies and procedures; and by requiring independent consultants in appropriate cases to ensure that compliance policies are crafted to guard against misconduct recurring.
To be clear, it is not our intention to use our enforcement program to target compliance professionals. We have tremendous respect for the work that you do. You have a tough job in a complex industry where the stakes are extremely high. That being said, we must, of course, take enforcement action against compliance professionals if we see significant misconduct or failures by them. Being a CCO obviously does not provide immunity from liability, but neither should our enforcement actions be seen by conscientious and diligent compliance professionals as a threat. We do not bring cases based on second guessing compliance officers’ good faith judgments, but rather when their actions or inactions cross a clear line that deserve sanction.
Our current examination priorities include: fee structures; suitability; order routing conflicts; recidivist representatives; microcap activity; excessive trading; and transfer agent activity. We are also closely focused on issues of importance to retail investors and investors saving for retirement. Throughout today’s sessions, Commission staff and our FINRA colleagues will provide you with further insights into three of our key priority areas: cybersecurity; anti-money laundering; and firm and branch office supervision and sales practices. We have chosen these areas because we see them as significant, continuing risk areas and because they represent strong opportunities for partnering with you.
OCIE is currently developing its priorities for fiscal year 2016 and, once again, will publish those priorities to help you and your firms identify vulnerabilities and strengthen your compliance programs. We welcome your input on risk areas and vulnerabilities that you believe should be priorities in our examinations.
Thank you for joining us for this important program. I hope you have a very constructive and useful day, and thank you for everything you do.