The National Society of Compliance Professionals (NSCP) recently offered a compelling webinar on the topic of “Allyship” which centers around personally helping marginalized colleagues move more center stage. By marginalized, the focus centers on those within the financial services industry who have historically been excluded from the conversation. The panelists came with thoughtful insights, including one panelist making this incredibly provocative statement: “Cultural fit is over!”
The SEC recently announced that they imposed a dramatic 40% increase in penalties from FY21 to FY22. This year's penalties mark highest in the last five years. Investment Advisors / Investment Companies faced 23% of the enforcement actions, the most of any Primary Classification. (https://www.sec.gov/files/fy22-enforcement-statistics.pdf )
Jerome Powell and the Federal Reserve recently announced yet another 75-basis point rate hike, raising the central bank’s fed funds rate between 3.75% and 4%. Powell also signaled potential smaller rate hikes in the future, but that interest rates may ultimately rise higher than initially projected. This fourth consecutive 0.75-point increase by the Fed, shows their continued commitment to taming inflation and restoring price stability.
As newlyweds of three months, my husband and I couldn't be happier. We each got to marry our best friend, we get to see each other all the time, and we are even expecting our first child. But over these last couple of months, we've also learned firsthand that marriage certainly comes with a need for adaptation. Before we married, I was queen of my castle in my own apartment. The bed was always made, the kitchen was always clean, and the clothes were always folded neatly. I quickly realized that household perfection was no longer a guarantee when there was someone else sharing space with me (especially when that someone is not too bothered by disorganization). I know some couples turn to outsourcing—sending out laundry and hiring cleaning services. Others turn to technology, investing in robotic vacuum cleaners and mops to keep the floors clean. I tried a more simple approach--I suggested some process improvements. Let's make a deal: how about the last person out of bed makes the bed? If I cook, will you clean up? If you can simply separate your laundry out for me, I'll take responsibility of the folding. So far these minor process changes have been working for us and I'm pleased to report that our townhouse is tidy.
Investing in Your Compliance Culture
For nearly four years between April 2017 and October 2021, Wells Fargo Advisors went unnoticed in a financially threatening scandal involving its failure to file 34 suspicious activity reports. Risky wire transfers facilitating "money laundering, terrorist financing, and other illegal money transactions to and from foreign countries"1 were swept under the rug due to the faulty implementation of Wells Fargo's 2019 update to its internal anti-money laundering, or AML, monitoring and alert system.
The August 19, 2022 compliance date of rule 18f-4 of the Investment Company Act of 1940 is approaching. The new rule is described by the Securities and Exchange Commission as an effort “to provide an updated, comprehensive approach to the regulation of funds’ “use of derivatives and certain other transactions”. It imposes derivatives management duties on mutual funds (other than money market funds), exchange traded funds, registered closed-end funds, and business development companies. An example of a necessary step in adhering to the new policy is a written derivatives risk management program, relying upon stress testing, led by a Derivatives Risk Manager. In addition, there are Value at Risk (VaR) measurements of leverage risk and Board derivatives oversight and reporting.
In March of this year, the SEC released its annual announcement of the year’s exam priorities. This year’s priorities include many of the usual standbys: marketing and disclosures, valuation, custody of assets, conflicts of interest, etc. The specifically highlighted priorities also include some trending areas in financial services, like ESG (Environmental, Social, and Governance), crypto assets, and information security/cybersecurity.
Release Notes for CLEAR Compliance™ (Q2 - 2022)
