Remote Supervision in the Pandemic World
The SEC and FINRA have long held that broker-dealers and investment advisers are required to supervise their employees’ conduct in order to prevent and detect violations of the securities laws. Moreover, the regulators have emphasized that remote or offsite offices and employees require particularly vigilant supervision.
Regulators expect both offsite and onsite monitoring of offices and employees due to the heightened risk inherent in remote arrangements. The work-at-home orders issued by the States in response to the pandemic have created supervision challenges for firms. While some consider the present state the “new normal,” no one really knows how and when this will all progress.
In the normal course of supervising remote offices and employees, firms review a sampling of customer files, review correspondence, advertisements and sales literature available at remote offices, review business records, including hard copies and computer files, and conduct in-person, on-site questioning and reviews, among other matters. Surprise reviews of remote offices are included in the expectations of regulators.
Under the current situation, on-site examinations by advisers are not practical. Milestones have been established by the government and medical professionals that, when met, will facilitate the return to work. However, some states are permitting certain facilities to open, notwithstanding that the milestones for a safe opening have not been met in many cases. Under these circumstances, employees may not return to work on-site in the near term.
Firms should review their policies and procedures to determine whether they ae designed reasonably to prevent and detect violations under the new circumstances. To the extent that firms have policies and procedures to monitor remote employees that have worked in the past they should continue to employ them, but also continue to consider enhancements as appropriate.
These times call for creative ideas to meet your requirements. Since onsite surprise audits are not practical at the present time, consider new monitoring approaches, such as unfiltered access to remote computers, bans on use of personal computers, and random calls to clients to ensure you are getting accurate records, among other possible monitoring devices like video calls with screen sharing.
Finally, each firm is different. Accordingly, you need flexibility to adopt and implement procedures to suit your firm’s individual structure and business needs. Make sure to document all efforts to monitor employees as well as consideration of future business plans to enhance monitoring when the stay-at-home orders are rescinded.
Oyster Consulting can help your firm develop, enhance and test your procedures as the workplace environment evolves. Our experts have years of industry experience and can quickly assess what areas of your firm need the most attention and review. For more information about remote supervision and how Oyster Consulting can help your firm call (804) 965-5400 or click here.
About the Author: Jeffrey Hiller is an industry professional with over 25 years of experience, specializing in Investment Advisor services. Prior to joining Oyster, Jeffrey was Chief Compliance Officer and Managing Director of Principal Global Investors where he created and managed the firm’s global compliance program. In his capacity as CCO, he provided global leadership and direction on regulatory compliance and ethical business practices for all of the firm’s business domestically, internationally and its seven boutique investment advisers. Jeffrey began his compliance career as Senior Counsel in the Securities and Exchange Commission’s Division of Enforcement in Washington, D.C. Following his government service, he held CCO roles with several leading Wall Street financial firms.