
By Bill Reilly
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An effective means to resolve an open examination or enforcement investigation is pursuant to a negotiated settlement with a regulator requiring the services of an independent third party (“ITP”) review. The goal of these reviews is to provide the regulator with a level of comfort to ensure future compliance by the firm.
Regulatory settlement driven ITP reviews generally occur in two ways:
In either scenario the goal of the ITP review is to address the concerns of the regulator by conducting the independent review and the subsequent adoption and implementation, including, among others, of recommended new/updated policies and procedures.
The pre-settlement review may place the firm in an enhanced negotiation position based upon written (FINRA, State of Florida) and unwritten (SEC and other states) sanction/disciplinary guidelines for assessing penalties for securities violations. It should be noted that NASAA has adopted “considerations” for states to utilize when settling regulatory concerns with broker-dealers. These guidelines utilize aggravating and mitigating circumstances provisions to increase or reduce penalties. In a scenario where a firm has completed an ITP review and has adopted and implemented the review’s recommendations addressing the regulator’s concerns, which is a mitigating circumstance, prior to the adoption of a final settlement document the firm may have enhanced its settlement position and negated the need for a post-settlement ITP review.
Oyster Consulting provides ITP services in both pre- and post-regulatory settlement engagements. For more information about how Oyster can help your firm with ITP services, click here or call (804) 965-5400 and one of our Relationship Managers will be happy to help you.
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