Why Client Oversight Is Crucial To Avoid SEC Fines (And How To Achieve Compliance)
Part of maintaining an effective compliance program is remaining attentive to regulatory trends. In recent years, the SEC has shown a heightened interest in ensuring advisors meet their fiduciary duties.
In its 2023 Examination Priorities, the SEC calls out regulation best interest and fiduciary duty specifically, noting that the Division will continue its focus on, “Processes for making best interest evaluations, including those for reviewing reasonably available alternatives, evaluating costs and risks, and identifying and addressing conflicts of interest.”
Firms that fail to meet their fiduciary duty may meet with regulatory scrutiny at best and SEC penalties and fines at worst. In 2022, firms paid a total of $4.194 billion in penalties.
Mitigating client-related compliance risk is a key part of ensuring your firm will not get caught up in SEC enforcement actions.
Client Oversight, the new tool from Orion Compliance, empowers compliance leaders and the firms they serve to automatically monitor client-focused compliance matters, helping to ensure they remain audit-ready.
Read on to explore the automated monitoring and reporting features within the Client Oversight tool that replace tedious manual tracking and record-keeping.
Part of your fiduciary duty is ensuring that all transactions align with securities regulations and internal policies before execution.
The SEC emphasizes the importance of proving your past compliance and establishing repeatable processes to uphold your fiduciary duty today and in the future.
The pre-trade compliance feature of Client Oversight integrates with Orion’s custom trading platform, Eclipse, to check all transactions allocated and updates to models against firm, team, and representative policies. It also features escalation capabilities, so your team can highlight transactions for review, and your compliance peers can review and respond in the dashboard.
By automating the pre-trade compliance check, you give your team repeatable processes to help ensure ongoing compliance. This feature keeps you audit-ready, with proof of policies and procedures around pre-trade compliance.
Share Class Alerts (SCSD)
One of the trends in SEC penalties and enforcement has been a focus on firms that unwittingly invested client funds in certain mutual fund share classes when more affordable options were available via their custodian.
Manually scanning for the most affordable share class is a tedious and error-prone process. Orion’s Client Oversight tool offers continuous monitoring and daily updates, powered by Orion Risk Intelligence, to alert compliance officers to any share class selection issues that arise across client accounts.
The share class alert features offer an audit-ready workflow and reporting to show regulators that your firm has a repeatable process to actively seek out the appropriate mutual fund share class for each client.
For larger firms, 13D/G reporting poses a potential compliance risk. If a firm is unaware of its beneficial ownership status, it may fail to promptly file the correct reports with the SEC.
Client Oversight watches firm-wide trading activity and automatically alerts compliance when your firm acquires more than 5% of a public company’s shares. This empowers your team to act quickly to report its status and remain in compliance.
And again, just as importantly, this feature provides your compliance team with proof of a repeatable process for monitoring activities that would trigger reporting.
Large Trader Alerts
Similarly, large firms must keep an eye out for transaction volumes or amounts that would trigger large trader status and 13H reporting. Orion’s Client Oversight provides compliance with automatic alerts when the firm’s activities exceed established thresholds within a daily or monthly timeframe.
As with its ownership alerts feature, the large trader alert function allows for timely and proactive compliance action and provides a repeatable process demonstrating your firm’s audit readiness.
Seamless and Centralized
Client Oversight joins the two existing facets of Orion Compliance, Firm Oversight and Employee Oversight, to provide your compliance officers with total visibility into compliance matters from one centralized dashboard.
Built into this consolidated platform is a sophisticated audit trail of all activity taken on a client’s behalf. CCOs have the flexibility to write alerts at the firm, team, rep, and account level, and all alerts, work product and audit evidence can be extracted when a regulatory request comes through..
Furthermore, Orion Compliance integrates with Orion Advisor Tech’s broader wealthtech platform and data, allowing for a seamless experience and powering time-saving tech integrations at your firm.
Want to see Client Oversight in action? Register for our webinar or request your demo today.