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Author: Loffa Interactive Group

The Cost of Compliance

Written by Loffa Interactive Group on . Posted in news, Resources.

In their most recent survey performed last year, Thomson Reuters asked Compliance professionals from more than 300 financial services firms what their biggest concerns and challenges were for 2016 regarding navigating the deep and turbulent waters of continuing industry regulations. The findings are intended to help firms with planning, resource, and direction and to allow them to benchmark their own practices to determine whether their own strategies are in line with those in the wider industry.

Below are some key points of interest revealed in the survey results:

  • No Letup in Regulation: 70% of firms are expecting regulators to publish even more regulation in the coming year with 26% expecting significantly more.
  • Time Commitment: More than a third of firms continue to spend a whole day every week tracking and analyzing regulatory change.
  • Resource Challenges and Outsourcing: There is a continued scarcity of skilled compliance personnel which forces firms to do more with less and putting the focus on the development of existing staff. A quarter of firms has opted to outsource at least part of their compliance functions to 3rd party providers due to lack of in-house compliance skills and the need for additional assurance on compliance processes.
  • Technology and Reporting: Regulatory developments are driving technological change with the remit of compliance broadening to cover cyber risks as well as the assessment of new technology and applications to help manage more aspects of firm-wide compliance. In addition, there is an increase in the amount of information requests from regulators resulting in an expected increase in liaison with regulators.
  • Focus on Regulatory Risk: Three-quarters of companies are expecting the focus on managing regulatory risk to continue to rise—due largely to greater demands on the management of conduct risk.

Do you think these predictions from last year are in line with what your team is seeing so far in 2016? Please email us today at [email protected] for a free copy of the full report and/or to discuss how Loffa Interactive can help you manage your firm’s compliance costs and processes!
Loffa Interactive Group
[email protected]
www.loffacorp.com

regulation

Letter of Free Funds Automation: A Case Study in Savings

Written by Loffa Interactive Group on . Posted in case study, Resources.

For many financial firms, the reams & reams of paper that are required to keep the company humming along are not always at the top of the list of executive concerns. However, as companies begin the yearend budgetary process, it might be time to cast a more critical eye on the mountains of paper that are most likely drowning the back office employees. There’s no denying the correlation between the increasing complexity of modern financial markets and the seemingly endless appetite for more paper.

Furthermore, as markets become increasingly complicated, regulatory due diligence and recordkeeping has become markedly more important. Take for example the process for executing a trade through a third party broker dealer (referred to as a trade away) in delivery versus payment (DVP) accounts. According to Regulation T, Section 220.8 C (a), the executing broker dealer and custodian are required to verify that funds are available by T+5 for every non-exempt security trade with a principal amount in excess of $1,000.

The resulting verification is referred to as the Letter of Free Fund, which is sent by the executing broker/dealer to the custodial broker of the account. The traditional method for sending and validating fund availability for trades executed in DVP accounts involves sending and receiving manual paper faxes, which must be retrieved, organized, processed, faxed back to the counter-party, stored in file cabinets, and eventually sent to an offsite storage facility.

Needless to say the complexity of the traditional method is also more likely to contribute to user errors. For many firms this process is not only logistically arduous, but financially onerous as well. Consider chart A below, which compares the financial burden of the traditional method versus the cost savings provided by going paperless using Loffa Interactive’s Freefunds Verified Direct TM (FVD).

Case study

*For Illustration purposes only. Loffa Interactive’s solution was available starting 2005.
**Chart assumes an annual trade away transaction growth of 20%, with the traditional method costing an average of $1.50 per transaction.**Monthly fees are subject to change.

Savings are conservative as they only take into the account the cost of performing the initial process. Internal or home grown solutions would actually be more, once the cost of storing these documents and ultimately destroying them properly, are taken into account.

Loffa Interactive Group’s patented Freefunds Verified Direct TM (FVD) application provides your firm with a paperless, centralized, automated and scalable solution that can help you achieve the goal of realizing significant cost savings while improving supervisory/regulatory controls and storage requirements. Our approach is focused on leveraging the efficiency of straight-through processing for Executing Broker/Dealers and Custodians.

How to Survive An SEC Audit

Written by Loffa Interactive Group on . Posted in education, Resources.

Five Important Steps in Preparing for an SEC Audit

As a business owner, there are few things that induce quite as much stress as receiving the dreaded letter from the SEC alerting you to an impending audit. However, whether it’s an audit with cause or simply a routine review, there are a few steps that the firm can take to prepare for the audit and ensure that it goes as smoothly and painlessly as possible.

  1. Upper management interview preparation. As part of the general training process the CCO and other top level executives should be prepped in advance for the interview portion of the audit. Executives should review the OCIE exam brochure and SEC Form 1661. Additionally, any executives who may be involved in the SEC audit interview should be familiar with applicable portions of the Freedom of Information & Privacy Acts. To be fully prepared, the firm may want to consider doing mock interviews for upper management.
  2. Establishment of a comprehensive compliance manual for all employees. As a standard operating procedure, each firm should have a detailed compliance manual that outlines standard operating procedures. The manual should cover a wide variety of topics including (but not limited to) insider trading, recording keeping, marketing and proxy voting procedures. The manual should be custom tailored to the firm, and all employees should be familiarized with the manual as part of the standard onboarding procedure.
  3. Retain a consultant to review the firm’s policies and procedures. Bringing in an outside consultant who specializes in SEC due diligence can help the firm to discover weak points in the compliance procedure before it becomes an active problem during an audit.
  4. Determine a strategy for the periodic review of the overall compliance plan. As the legislative landscape changes, it is important to review the plan at least annually in order to make sure that all new changes to the regulatory landscape have been incorporated into the plan.
  5. Consider a cloud/paperless solution for recordkeeping and documents. A main pillar of the plan should be the establishment of an offsite, electronic back up plan for all relevant documents. Many firms have incorporated secure cloud networks in order to store documents that are crucial to the overall operation of the firm. Electronic back up is crucial to the business continuity and disaster recovery plan for the firm. Some even hire a 3rd party provider, like Loffa Interactive Group, to prove them with technologically advanced document retention, archival and storage applications. Please visit www.LoffaCorp.com for more information.

By following these five steps, the firm can help to ensure that the SEC audit runs smoothly. While many firms will discover deficiencies in the process as part of the SEC audit, these steps can also help the firm to respond quickly to any requests from the SEC and promptly correct any deficiencies uncovered during the audit process.