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Securities Compliance Sentinel Analysis of cutting-edge securities industry issues

Broker-Dealers Really Need to Handle Confidential Information Better. . . Or Else

Posted in Broker-Dealer Regulation, Compliance and Supervision, Registered Representatives, SEC Compliance, SEC Enforcement

The SEC Staff issued a report on the handling of confidential information by broker-dealers.  See http://sec.gov/about/offices/ocie/informationbarriers.pdfProblems.  This report cited various issues, including, but not limited to, the unmonitored viewing of nonpublic data, and informal, undocumented interaction among different groups within these entities.

The report was prepared by the Office of Compliance Inspections and Examinations, and was published to assist broker-dealers in their efforts to safeguard customers’ confidential information.  The report illustated a variety of conflicts of interest between the broker-dealer and the customer as well as the potential misuse of this information while also pointing out a variety of methods now used to protect such information by broker-dealers.  The SEC Staff identified particular areas of concern including the fact certain executives had unlimited access to this type of information, and there were gaps in compliance oversight in protecting said information.

Finally, this report was not only to announce these findings.  Most assuredly, the SEC will be looking for these issues in the future, and, if found, there will probably be no leniency.  That is, the SEC will point to this report, and indicate broker-dealers were on notice to correct these failings.