Epic BD AML Compliance Failure Yields Another Record Fine

On Monday, December 5, 2016, FINRA announced yet another record fine against a broker-dealer for AML compliance failure. This action follows another just seven months ago in which FINRA fined a broker-dealer complex $17 million for AML compliance failure. There are numerous messages here which you can read about in my LinkedIn article that analyzes the new case. The bottom line here is to remember that the days of a slap on the wrist for a firm with a serious AML compliance failure are over. FINRA has demonstrated that it will not hesitate to slap a broker-dealer with a significant sanction, and even to name individual AML compliance officers if violations are serious. There are parallels between this case and FINRA’s May 2016 action against a Florida BD complex. Read my summary of that case here.

The case involved several significant areas of compliance breakdowns. The firm utilized and automated surveillance system, but according to the FINRA settlement document, the data feeding into the system was inaccurate and/or missing information critical to its proper functioning. FINRA also found that the system did not utilize scenarios to detect specific types of activity that it believed the firm systems should have covered.

Another AML compliance failure was that there were deficiencies in the manner in which the firm determined ownership and saleability of microcap securities. FINRA noted that the firm was involved in the liquidation of over 3.7 billion shares of microcap issuers during its review period and earned $10.4 million in commissions from same. Because the system for determining whether the shares could be properly liquidated was inadequate, FINRA found that the firm violated NASD Rule 3010, FINRA Rule 3110, and FINRA Rule 2010.

The AML compliance failure also involved inadequate procedures covering suspicious activity reporting, and failure to conduct adequate due diligence on foreign financial institutions that were also firm affiliates.

Atkins in Forbes: Email and Social Media Compliance

Last month in New York, I was invited to speak with a group of broker-dealer compliance staff at an event about email and social media compliance. More specifically, and to be technically correct, we call this “supervision of electronic communications” and you can read all about it in FINRA Rule 3110(b)(4). There, I had the opportunity to speak with Forbes contributor, Joanna Belbey. Before the event, we had a good discussion on the FINRA 2016 examination priorities and more specifically, how they relate to email and social media compliance. You can read the interview by clicking here: Mitch Atkins Forbes. See the follow-up piece to this (Don’t ‘Set it and Forget it’) by clicking here: Mitch Atkins Forbes Part II.

Email and Social Media Compliance Decrypted

After having worked in regulation for nearly 20 years, working as a consultant to broker-dealers and investment advisers has been truly enlightening, particularly in understanding the perspective of the chief compliance officer. I have had the opportunity to help design, audit and improve systems of supervision for electronic communications. What has become evident in my recent work with consulting clients is that FINRA has been very active in its email and social media compliance reviews. Today, more than ever, the term electronic communications includes far more than email. In the past, firms could be relatively confident if they had a decent email compliance system and banned the use of social media. But today, if talented advisors are not permitted to use popular communication channels, they may work elsewhere – read: competitors.

For these reasons more employers are ensuring that they have top-notch supervisory controls in place to allow the use of communication channels advisors want. To that end, firms wanting to beef up compliance might consider the following:

  1. procedures – development of clear policies and procedures covering communications;
  2. technology – implementation of a cutting edge email and social media compliance platform (but be careful and remember that simply buying the system isn’t enough – FINRA recently published an AWC in which a Chief Compliance Officer was suspended for failing to implement such a system – see FINRA Case 2014039194102 – Feb. 23, 2016);
  3. personnel – ensuring that persons tasked with conducting email and social media compliance reviews are adequately trained and that adequate resources are devoted to conducting reviews;
  4. controls requiring annual compliance questionnaires in which advisors certify their compliance with policy and disclose all communication channels they use;
  5. testing – some firms are hiring summer interns to search advisor names against social media sites (and who is better at social media?).

And finally, your keyword flagging database is the key (no pun intended) to the effectiveness of your supervisory system. Make sure that the database is reviewed frequently, that it is dynamic and evolves with both the business of the firm and the changing times. See my LinkedIn article about that for more details.

Mitch Atkins is Founder and Principal of FirstMark Regulatory Solutions, a broker-dealer and investment advisor compliance consulting practice in Boca Raton, Florida. Contact Mitch at 561-948-6511.


Mitchell C. Atkins to Present at 21st Annual Spring Life Settlement Conference

mitchell c. atkins

Mitchell C. Atkins, FirstMark’s founder and FINRA broker-dealer consultant will present on the fiduciary duty of agents and advisors at the 21st Annual Spring Life Settlement Conference in Boston on May 5, 2015. He will discuss the obligations of registered persons related to life settlement options when a variable policy is lapsing or is surrendered. Some states require disclosure of life settlements as an option, but this is not universal. Many customers who lapse or surrender a life insurance policy receive less money than if they considered a life settlement. The panel will address where there is an obligation under a fiduciary standard or FINRA Suitability Rules, and how recent DOL proposals regarding the fiduciary standard might impact life settlements. Mitchell C. Atkins has extensive experience in variable insurance products, including variable life settlements and the obligations of representatives and broker-dealers selling these products. While he was employed with FINRA (previously NASD), Atkins was designated as a national regulatory expert in mutual funds and variable insurance products by FINRA. Atkins worked at FINRA (previously NASD) for 20 years and has presented at numerous industry conferences on the topic of variable insurance. For more information about the conference, please visit the Life Settlement Association (LISA) internet site.

LISA is the nation’s oldest and largest organization representing participants in the Settlement Industry with a current membership of over 85 Companies, doing business in all fifty states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.  LISA’s membership consists of Brokers, Providers, Financing Entities, and Service Providers to the industry.

FirstMark Regulatory Solutions was founded by Mitchell C. Atkins in December of 2013 and is based in Fort Lauderdale, Florida.  FirstMark offers a broad range of broker-dealer compliance consulting services, including AML independent testing, FINRA membership applications, internal controls testing, SRO relationship management, strategic advisory, and litigation support.

Mitch Atkins to Discuss CCO Liability at ACFCS Financial Crime Conference in New York City

Mitch Atkins, founder of FirstMark Regulatory Solutions, is presenting at the Association for Certified Financial Crime Specialists (AFCFS) 2015 Financial Crime Conference on Tuesday, April 21, 2015.  Atkins will participate as a panelist on the Financial Crime Landscape for the Securities Industry panel and will discuss recent trends in chief compliance officer (CCO) and anti-money laundering compliance officer (AMLCO) liability.  As part of the discussion, Atkins will cover recent regulatory guidance for CCOs and AMLCOs.  There will be a panel discussion on FINRA’s recent action against an AMLCO which has raised concern among those with AML compliance responsibilities.  After the discussion on CCO liability, Atkins will discuss FINRA’s continued focus on complex products as was discussed in their Annual Examination Priorities Letter. Complex products present numerous opportunities for financial crimes, particularly when the product lacks transparency and liquidity. Atkins will discuss recent FINRA cases and examination trends involving complex products, including one related to a fraudulent private placement that resulted in the bar of a broker-dealer principal and the expulsion of his firm.

Click below for a link to the conference registration site:

mitch atkins

Click here to visit Mitch Atkins‘ bio. The Association of Certified Financial Crime Specialists (ACFCS) is a worldwide organization for private and public sector professionals who work in diverse financial crime disciplines. Its membership includes compliance officers, law enforcement agents, regulators, attorneys, technology providers, and others who work to detect and prevent financial crime in all its forms – money laundering, tax evasion, corruption, fraud, cyber crime, terrorist financing, and more. FirstMark Regulatory Solutions was founded by Mitch Atkins in December of 2013 and is based in Fort Lauderdale, Florida.  Mitch Atkins is a FINRA broker-dealer Consultant. FirstMark offers a broad range of compliance consulting services, including AML independent testing, internal controls testing, FINRA membership applications, SRO relationship management, strategic advisory, and litigation support.

FirstMark Regulatory Solutions Celebrates 1 Year Anniversary

January 2015 marks the one year anniversary of FirstMark Regulatory Solutions’ entry into regulatory compliance consulting.  FirstMark offers specialized compliance consulting services to FINRA and SEC registered broker-dealers.  Services offered to clients include:  FINRA New Member Applications (NMA), FINRA Continuation of Membership Applications (CMA), anti-money laundering (AML) independent testing, supervisory controls testing, litigation support services, training, general compliance and regulatory support services, and more.  FirstMark’s founder and principal, Mitch Atkins, said that the firm’s first year in business has been tremendously rewarding and that its growing client base continues to express appreciation for the high-quality services it provides.  Mitch Atkins is a broker-dealer and investment adviser compliance consultant covering a broad range of FINRA and SEC matters.  FirstMark is based in Fort Lauderdale, Florida.

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Mitch Atkins Presents at FINRA South Region Compliance Seminar

Mitch Atkins, founder and principal of FirstMark Regulatory Solutions, will present at the FINRA South Region Compliance Seminar in Fort Lauderdale, Florida on November 20, 2014.  Atkins will present as a panelist on FINRA’s Suitability panel. The panel will discuss the FINRA Suitability Rule (Rule 2111), and in particular, the suitability of variable annuity L-shares and non-traded REITs.

While he was employed with FINRA (formerly NASD), Atkins was designated as a national regulatory expert in the areas of mutual funds and variable annuities. He founded FirstMark Regulatory Solutions in December of 2013 in Fort Lauderdale, Florida. FirstMark offers a broad range of compliance consulting services, including AML independent testing, Rule 3120 supervisory controls testing, SRO relationship management, FINRA membership applications, training, and more.

To register, please visit www.finra.org/conferences/southregion

For more information and to view the seminar brochure and agenda, simply click the image below.


FirstMark founder Mitch Atkins – Panelist at the 3rd Annual Life Equity Roundtable

FirstMark Regulatory Solutions founder and principal, Mitch Atkins, will participate as a panelist at the 3rd Annual Life Equity Roundtable in Aurora, Ohio on July 16, 2014.  The session, titled Variable Transactions Panel, covers various aspects of variable life settlements and the regulatory requirements for transactions involving these products.  The Roundtable will be attended by representatives from every aspect of the life settlement business, including investors, actuaries, brokers and marketers.  The discussion will include legal updates within the life settlement space, including FINRA requirements for the products.

FirstMark Regulatory Solutions Announces Launch of Broker-Dealer Consulting Practice

Fort Lauderdale – January 28, 2014. FirstMark Regulatory Solutions announced that it would begin offering consultancy services to clients in the financial services industry.  Its founder, Mitchell Atkins, said that the firm will offer its services to a variety of clients including SEC and FINRA registered broker-dealers, their accountants and their attorneys.  He said, “The breadth and scope of the ever-changing and sometimes overlapping regulatory requirements often prompts organizations in this industry to seek expert assistance. Navigating these complexities is our business and our passion.”

Atkins has over 20 years experience in various roles at the Financial Industry Regulatory Authority (FINRA) – formerly the National Association of Securities Dealers (NASD).  Most recently, he held the position of Senior Vice President and Regional Director of FINRA’s South Region.  In that role, he oversaw the regulatory programs of FINRA’s Dallas, New Orleans, Atlanta and Florida District Offices.  Atkins has extensive experience in the areas of regulatory risk assessment and complex regulatory matters.  Atkins said,

“I am excited about the opportunity transform my extensive experience and unique perspectives into valuable insights that will help those in the industry successfully navigate its complex regulatory environment.”

FirstMark Regulatory Solutions, which is headquartered in Fort Lauderdale, Florida, will provide specialized services including litigation support, FINRA membership applications, AML independent testing and more.