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Employee Conflicts of Interest MNPI & Enterprise Conflicts

Top StarCompliance Blogs Of 2019: The Year In Review

Control room challenges and solutions dominated your blog reading, as did regulatory updates and—perhaps most interestingly—the potential for a bit of gossip

StarBlog readers, you have revealed yourselves. Over the past year, pretty much any blog having to do with control room or regulation was important to you. This is as expected. Control room operations are an historically underserved compliance function when it comes to tech (though at Star, this is no longer the case.) And no compliance-blog reader worth his or her salt would ignore a chance to catch up or keep up on the latest bit of regulatory news.

But one of the best-performing blogs hinted at the possibility some juicy tidbit might be passed along: some irresistible secret spilled by an industry tongue-wag who just couldn’t help himself. Which just goes to show that even compliance officers—keepers of the ethics flame and priestly guardians of firm reputation—aren’t immune to the charms of some well-reported gossip. Or better yet, insightful gossip; it could be argued it’s the job of a compliance officer to keep her ear to the ground—or the closed office door—to keep the firm on the straight and narrow.

Without further ado, here are the most popular Star blogs of 2019, listed in ascending order:

In this blog from June 24, Star CEO Jennifer Sun gave her top-of-the-team perspective on Star’s brand-new control room software solution—Compliance Control Room—and why firms of all sizes can benefit from it. Written from an in-house interview, here are some key quotes:

  • “If you’re part of the deal-approval process in your firm, you have to be confident you’re making the right call—which means having all the information you need readily and quickly available. Star’s control room software aggregates critical, deal-related data into a single platform that manages and automates the workflow.”
  • “On Wall Street, even among smaller firms, employees move around a lot. You can’t rely on a banker being in the same job for 20 years for your conflicts management system. You need software that captures deal-related information. So the closer you get to the epicenters of finance, the more firms buy into the fact that you need control room software.”
  • “It’s important to never think you’re done when you’re building software. Good software solutions that clients value are ones that continue to evolve. So [Compliance Control Room] will continue to grow the more our clients use it, and the more we learn about their needs. At Star, our build culture is we don’t do things halfway.” 

Read “Compliance Control Room: View From The Corner Office” in its entirety here.

This recently published blog (November 4) covered an equally recent FCA Market Watch newsletter that highlighted the regulator’s view on personal account dealing, or PAD. The newsletter captured industry attention because it’s not an area the FCA spotlights much. The blog sought to capture the essence of what the FCA was trying to get at and what solutions might be available to firms that feel they need to step up their compliance game in this area.

  • The FCA carried out a study to assess if firms have incorporated recent, specific changes to the market abuse regime, e.g., that firms must construct a “control framework” to minimize the risk that PAD might conflict with client interests, result in market abuse, or create a conflict between personal interests and obligations to report suspicious activity.
  • What the study found, however, was the opposite: “The way in which firms control and monitor PAD varied substantially in terms of practice and standard.” The absence of pre-approval for PAD trades, in particular, was highlighted as a potential problem.
  • With STAR, employees have an easy-to-access, easy-to-use application for entering trade requests and—in most cases—getting a fast yes-or-no answer. Not having to wait on an answer means employees are less likely to bypass pre-clearance out of frustration, or the fear of losing out on a good share price, which could put the firm in regulatory jeopardy. 

Read “The FCA Throws A Spotlight On Personal Account Dealing” in its entirety here.

Published in May, this blog takes a close look at the SEC’s Advisers Act Rule 206(4)-5. Issued in 2010, the Advisers Act Rule 206(4)-5 addresses the issue of individuals or firms contributing money to candidates or office holders in the hopes of being awarded advisory business for public pension plans and other government investment accounts. The blog also highlighted how Star can help manage the risk associated with this kind of activity.

  • In finance, pay-to-play can mean a state or municipality choosing an advisor with poor asset-management performance or higher fees because an office holder or candidate received a timely donation. This is potentially bad news for those with their money in state-run pensions.
  • Rather than outright ban political donations from investment advisors, Rule 206(4)-5 imposes a “time-out.” Investment advisors and covered associates can contribute what they like, but have to wait a specified amount of time before they can advise for compensation a government investment client related to that candidate or office holder.
  • Star’s Political Donations product can help. Before covered associates make any kind of political contribution, they log in to the STAR Platform, fill out a pre-clearance request form, and wait for an automated approval or denial decision.
  • With Political Donations, your firm’s code-of-conduct is programmed into your version of the STAR Platform, allowing you to set donation thresholds your company has established and follow precise rules to automatically check political contributions.

 Read “Pay-To-Play: The SEC Crackdown And What You Can Do About It” in its entirety here.

As it turned out, there were no juicy tidbits to be found in this blog, at least not of the gossipy sort. There were, however, many juicy tidbits of the insightful and illuminating sort. Our lifelong compliance officer—currently CCO at a global investment bank—related a lifetime of lessons learned in this blog and its highly successful follow-up: Confessions Of A Lifelong Compliance Officer: Part Two. Here are some key takeaways from Part One:

  • “In the late 80s, my job was straightforward: M&A. Over time, we expanded into restructuring and then financing. I [was able to keep] the restricted list in a spreadsheet and reviewed employee trading from paper statements.”
  • “I’ve had people tell me over the years: ‘I wouldn’t want your job. Compliance does the jobs no one else wants to do.’ But ultimately I saw every ask as an opportunity to learn.”
  • “It’s easy to stay in your silo, especially in compliance. Nobody wants to talk to you. Everybody thinks they’re in trouble if you call them. So we made an effort to reach out to the business, to figure out what we were doing right and what we were doing wrong.”
  • “Say you have a new CRM that’s being developed, you want to be in on that from the beginning. You want to have a hand in it. I literally went and sat at the table.”
  • “The role of compliance is to advise, and it’s never been more important as a compliance officer to truly have the best interests of the firm, clients, and employees at the core of whatever it is you’re doing.”

Read “Confessions Of A Lifelong Compliance Officer: Part One” in its entirety here.

Read “Confessions Of A Lifelong Compliance Officer: Part Two” in its entirety here.

For the most-read blog of the year, you—our devoted readership—have brought us back around to control room. This increasingly scrutinized and regulated function is on the mind of compliance professionals far and wide these days, and you’re obviously right there with them. This blog served as an overview of the control room function, with key quotes from a head of compliance control room at one of Africa’s leading banks. Following are some article excerpts:

  • “There’s a growing awareness in financial services about the purpose and the need for a control room function as part of the larger compliance function, driven by increased regulation as well as increased complexity in day-to-day operations.”
  • “Control rooms are intense environments. The work is fast-paced and there’s a lot to keep track of. Software can automate much of what previously could only be done manually, but it also keeps data up to date. In this job, data can’t go stale.”
  • “The purpose of [control room] is to manage the flow of sensitive corporate information in a multi-service financial institution, like ours. The more services you offer, the greater chance for conflicts. You need to manage the flow of information in every respect.”
  • “Compliance has traditionally been more about anti-money laundering, terrorist financing, and consumer protection. The increased focus on market conduct means banks and other financial institutions need to beef up their controls around it.”
  • “Understanding the information is key to managing it, and you can’t do that from spreadsheets anymore. Capturing MNPI, no matter where it originates from, is critical. You need proper record keeping and audit trails. You need good report generation. The software has to be easy for front line people to use and tech teams to integrate with. “

Read “Compliance Control Room: What Is It And Who Needs It?” in its entirety here.