The Keys to Optimizing Your Branch Audit Program

Transcription

1 The Keys to Optimizing Your Branch Audit Program

2 Debbi Prince Associate Director, National Audit Program For eight years Debbi Prince has directed the Audit Solutions Department for National Regulatory Services. In this capacity, Debbi oversees hiring, training and the overall performance of the audit team and logistics department. Under her supervision NRS delivers thousands of home and branch office inspections for Broker-Dealers and Registered Investment Advisers. Prior to NRS, Debbi managed the audit program for ComplianceMAX Financial. Prior to ComplianceMAX she was a regulatory compliance auditor and consultant for Monahan & Roth, LLC. Debbi s career in securities began in 1989 at First Allied Securities in the Operations and Compliance Departments then a move to Round Hill Securities gave her the opportunity to relocate to North Carolina where she currently resides. Debbi has been employed with NRS since Debbi attended UC Raymond Walters College in Cincinnati with an emphasis on business development and held Securities Licenses 7, 24,and National Regulatory Services 2

3 Tara Stevenson, IACCP Manager, National Audit Program Tara Stevenson began her career with National Regulatory Services (NRS) in 2009, in which she has completed over 900 compliance audits nationally. In her current role of Manger of NRS Audit Solutions, she oversees the field audit team and client relationships, ensuring quality control and timely delivery of thousands of compliance audits annually. In 2013, Tara successfully completed the Investment Adviser Certified Compliance Professional (IACCP) program and with such education she is able to provide sound and practical guidance to Registered Investment Advisors. Tara graduated from California State University of Long Beach, CA with a Bachelor s Degree in Business Administration and Marketing, with an emphasis on Finance National Regulatory Services 3

4 Introduction Under existing regulations, branch office inspections pose significant obligations of broker-dealer firms. The regulator s top priority remains with investor protection. It has been said, An effective risk-based branch office inspection program is an important component of a broker-dealer s supervisory system and when constructed and implemented reasonably, it can better protect investors and the firm s own interest. Today we will look at ways to Optimize your Branch Audit Program National Regulatory Services 4

5 Regulatory Alerts & Bulletins FINRA Rule 3110 requires that firms establish effective policies and procedures for the purposes of their branch examination program. Notice to Members SEC OCIE Risk Alert provides guidance and signals that brokerdealers must strengthen their branch exam processes. Notice to Members National Regulatory Services 5

6 Inspection Cycle Broker-Dealers are required to conduct on-site inspections of each office location. Office of Supervisory Jurisdiction annually Supervision of Non-Branch Locations - annually Non-Supervisory Branch every three years at minimum Non-Registered Locations / Office of Convenience every three years at minimum Certain Outside Business Activities other cycle Re-Audits other cycle Newly Registered Offices other cycle Various State Requirements - (e.g. Virginia, Washington, New Mexico, Maine, Indiana, Oklahoma, etc. ) 2015 National Regulatory Services 6

7 Unannounced Exams Approximately 15% of your annual exams should be successful unannounced visits. The result of a prior exam aids in determining if the next visit should be unannounced. Risk based and for-cause Random selection Organize by geographic location Organize by calendar events/holidays 2015 National Regulatory Services 7

8 Polling Question At what frequency do you conduct unannounced audits each year? a. never b. less than 10% unannounced c. 10% - 20% unannounced d. over 20% unannounced 2015 National Regulatory Services 8

9 Tailor the Focus Review your checklist Size of the office Scope of business activity Products and services offered Volume of business Client base Compliance issues / disciplinary history of RR in the branch Pre-Audit review 2015 National Regulatory Services 9

10 Staff of Examiners Senior examiners; one who is seasoned and experienced. A seasoned examiner is one who is possibly worked for more than one firm. One who has seen an array of branch models from different perspectives. Review any possible conflict of interest Able to challenge assumptions when necessary Senior examiners should periodically shadow other auditors Avoid examiners who hold a financial interest in the person or branch being audited National Regulatory Services 10

11 Three Elements of an Audit Pre-Audit Process be prepared when you get to the office Consider a formalized pre-audit questionnaire to gather materials in advance Study the materials provided to improve the integrity of your on site review On Site Audit the exam begins when you pull into the parking lot and isn t completed until the exit interview Be observant from the moment you arrive until you leave Encourage a thorough and challenging inspection process to address the specific office location s business model Begin corrective actions where applicable (e.g. help the branch create mandatory compliance folders) Exit Interview/Exit Document Post Audit the corrective action process plays an integral part of the overall audit process Be sure to follow your corrective actions to completion 2015 National Regulatory Services 11

12 Corrective Action Process A written record of the inspection must be kept by the firm, and this report must include, among other things, the testing and verification of the firm s policies and procedures. The corrective action process plays a integral part of the audit process. Many times this process takes a back seat to other responsibilities of an examiner (i.e. more branch exams, regulatory requests, the all-important time off). Maintaining and organizing all supporting documentation related to each exam along with all comments regarding corrective actions is essential to a successful program National Regulatory Services 12

13 Reporting An area of focus in 2015 is the time it takes a broker-dealer to deliver responses to regulatory requests. Do you have the staff? Do you use technology? How organized are you? 2015 National Regulatory Services 13

14 Polling Question Do you currently use technology to support your audit program? a. No b. Yes c. Partially d. Does not apply 2015 National Regulatory Services 14

15 Avoid Undermining a Successful Program What can undermine a successful audit program? Staffing Lack of resources Turnover Conflict of interest Liability & risk Budget Unannounced Unexpected travel costs Equipment Regulatory Priorities Scheduling Sufficient Year-End Reporting 2015 National Regulatory Services 15

16 THANK YOU Debbi Prince Associate Director NRS, Field Audit Solutions Willow Creek Rd. San Diego, CA Telephone: Mobile: Tara Stevenson, IACCP Manager NRS, Field Audit Solutions Willow Creek Rd. San Diego, CA Mobile: Office: Oriana DeRose VP of Sales NRS, Sales 29 Brook Street Lakeville, CT Telephone: National Regulatory Services 16

17 PLEASE STAND BY FOR AN NRS SOLUTIONS DEMO 2015 National Regulatory Services 17