Sutro at SIFMA-CL (Day 2)

SEC ANNOUNCES 11 AREAS OF SCRUTINY FOR THEIR 2008 BROKER DEALER EXAMS


At the SIFMA CL General Session, the SEC announced eleven areas of scrutiny for their 2008 Broker/Dealer examinations:

1. Valuations.
2. Adequacy of firm internal controls over material non-public information, including written supervisory policies and procedures and testing.
3. Retail sales practices. Particular focus on sales to seniors (SEC Report), suitability of sales of CMO’s, structured products, limited partnerships, REITS and other alternative investments.
4. Supervision. Particular focus on any unsupervised firm activities, any failure to implement and test written supervisory procedures and on the adequacy of supervision of “independent brokers”.
5. Given current market conditions, the SEC will be looking at net capital and the firm’s internal controls around the calculation of net capital.
6. Trading issues. Particular focus on best execution and Reg SHO compliance.
7. Fixed Income. Particular focus on pricing, mark-ups, suitability, CMOs, asset-backs, and G-37 “Pay to Play” compliance.
8. Rating agency scrutiny.
9. Conflicts of Interest. Particular focus on whether Advisors are paying to be on a preferred B/D recommended list and whether firms are recommending securities in which the firm has a financial or ownership interest.
10. AML. Particular focus on adequacy of independent testing.
11. Information and account security. Particular focus on Reg S-P controls to protect customer information. Particular focus on outside vendor outsourcing and the vendor’s protection of non-public customer information.