Firms Scrutinize Brokers’ Printing, Texting, Outside Activities in Remote Era
As firms mull whether to extend remote work options for their broker sales force post-pandemic, several senior compliance officials noted the potential trouble spots for supervising reps and how to monitor a scattered workforce.
“There are some firms that aren’t trying to get it right,” said Robert Colby, Finra’s chief legal officer. “We’re trying to do what we can to track them, and bring them into line.”
Another challenge is maintaining a “culture” around compliance without face-to-face interactions, according to Hillary A. Sale, a Georgetown University Law Center associate dean and professor and Finra public governor.
“It’s actually a long-run experiment,” Sale said. “We just don’t know if you can in fact effectively inculcate culture in a large remote organization. We have very few examples of it, and obviously we don’t really have them in this context.”
Firm compliance officials said they were leaning on some new supervisory tools, data and online monitoring, including setting Google alerts for brokers’ names, to keep up.
“Our supervision structure has gotten so much more efficient,” said Linde Murphy, chief compliance officer of San Antonio-based broker-dealer M.E. Allison & Co., Inc., and the small firm representative on Finra’s Board of Governors.
When compliance officers want to review brokers’ phones to see if they adhered to compliance rules, they may do so over a Zoom or WebEx call rather than as previously in person, Murphy said. To catch brokers’ unreported outside business activities, compliance teams should use the Google alerts, Murphy said.
She suggested firms track the number of enforcement or disciplinary actions they are taking since the Covid-19 pandemic and compare them to pre-pandemic levels. If there are substantial increases or differences, firms should review whether there may be a failure in the remote structure, Murphy said.
Compliance teams have “several tools” to handle the supervisory issues that arise more frequently under remote conditions, said Evan Charkes, a managing director and associate general counsel for Bank of America, who supports the Merrill Lynch Wealth Management business.
Supervisors can surveill brokers’ email to see if they are suggesting clients speak through unarchived channels and may also track LinkedIn postings for brokers’ unreported affiliations with outside businesses. Quarterly meetings with managers, and accelerating required periodic inspection schedules can also help catch potential issues.
“I don’t think it creates additional risk or heightened risk, merely by someone working from home because you have supervisory tools available that are used,” Charkes added.
In one example, which was not referenced on the panel, Morgan Stanley fired a veteran broker in Florida who allegedly printed confidential firm documents at home during the pandemic.
If the temptations are higher under out-of-office conditions for texting and other violations, by and large, firm systems were already prepared for a remote world with cloud-based systems for monitoring and tracking many day-to-day tasks, such as trading, the panelists said.
“It doesn’t really matter where the trade is being placed, if they’re working from home or if they’re working from the office or where they’re emailing them,” Murphy said. “It’s all coming through the same system.”
In heartening news to brokers wary of ‘big brother,’ the three panelists who work at firms said they had not implemented any voice recording tools for their remote workforce.
All panelists agreed that firms would likely have to continue their monitoring practices in some form, even as pandemic-related work restrictions subsided.
“I don’t see this as an either-or situation, meaning either everyone’s going to be in the office or everyone’s going to be at home. I don’t see 500,000 reps working from home either,” Charkes said.