Preventing FINRA Penalties:

Proactive Compliance for All Regulated Users

Preventing FINRA Penalties: Proactive Compliance for All Regulated Users

Recent news about a major global bank’s “significant supervisory failures” around inappropriate internal access of research hoots reminds us, once again, of how important regulatory compliance has become and how steep the penalties can be for failure to adopt the appropriate processes and technologies. The Financial Industry Regulatory Authority (FINRA) fined a major global bank $12.5 million for allowing traders to listen in on the daily research hoots and having no process in place to prevent it. The news, reported by the Financial Times, is just the latest recognition that communications compliance is critical – and it is here to stay.

Perhaps more important is the reminder to firms that compliance goes well beyond just the turret user, extending to all regulated users. This includes the trader’s support staff of researchers, analysts, middle and back-office personnel – anyone involved in the firm’s trading strategies. Consequently, in addition to trading strategies, it is imperative that firms develop communication strategies to keep their companies compliant.

At IPC, we have been aware of this issue for some time and have evolved our products and services to help firms address it. Hoot management became a feature in our communications platform quite a while ago. The capability advanced with the introduction of Unigy in 2011, enhancing the ability to manage communications barriers for internal communications. Unigy provides for line permissions, giving firms hoot options so users have better control of who can speak and who can listen to hoot communications.

But with ever-greater regulatory requirements, required compliance capabilities for hoot and intercom have advanced. We’ve continued to hear from firms asking us to develop even more advanced tools to control hoots and ensure that required communications barriers are more easily adhered to.  Many of the firms are doing this manually and are seeking automated, audited applications to manage this.

Developing an application that provides a dynamic “policy” or “rules” engine is on the horizon. An app capable of implementing, administering and enforcing a firm’s corporate compliance guidelines and the regulatory requirements for each regulated user, asset class and trading location is essential for reducing risks. Ensuring that only those individuals who are allowed to talk to one another and share data can do so will go a long way toward keeping all of a firm’s regulated users compliant.

IPC has and will continue to be at the forefront of providing proactive compliance strategies and supportive new technologies for capital markets firms. As firms think about their own communications strategies and future FINRA actions, they should seek support from partners whose expertise, commitment and innovation goes far beyond the turret and trader and can focus on all of their regulated users.