Getting the Message Right
So Much to Review, So Little Time
For every financial institution, the proper supervision driving compliance requirements related to advertising, communications and correspondence is one of the most challenging aspects of their compliance responsibilities.
Regulators continue to focus on the controls and risks ineffective policies and procedures present to the industry. In fact, year after year, compliance deficiency fines and sanctions in communicating with the public are consistently in the top three findings levied against firms. To compound these challenges, firms are required to handle these increasing compliance burdens with little or no additional resources, creating a significant need to improve efficiency.
Common Challenges of Managing Advertising Compliance
Effectively managing advertising compliance requires meeting three key challenges; retention, consistency, and efficiency.
1. Retention processes and documentation of review and approval
Like all compliance issues, proper retention processes as well as documentation of review and approval is critical. A sound program consists of a process where all communications and compliance work product can be retrieved and accessible in one place. This may include the original submission, the reviewer’s comments, responses to comments and the final piece. In addition to internal reviews, any records of regulatory filings, response letters, updated amendments, date of approval and of first use needs to be maintained. Accurate record keeping will reduce the stress of reviews by regulators and provide a reference to past pieces to inform future supervision.
2. Consistency and Standardization
Regulators continue to emphasize the importance of maintaining and upholding the firm’s compliance standards and policies regardless of the organization’s structure. With reviewers very often working in separate locations and with varied levels of expertise, it is critical that there is an efficient way for all reviewers and submitters to access and understand firm policy. Successful organizations are able to clearly communicate internal standards to all areas of the organization and to any individual who submits a communication. Delivery of the process from compliance department needs to be consistent and clear.
3. Speed and Efficiency
There is significant business pressure on the compliance department to deliver timely turnaround of submitted communications. Marketing and the organization’s sales force need to present information on their firm’s services and products at the speed of business. Problems always arise when submission and response is too slow, creating zero visibility to the public or dated information. These instances may foster a culture where people try to circumvent compliance. The compliance department needs to be able to position themselves as a business enabler not a business obstacle. A proper tool to solve these challenges creates a win-win situation for all involved.
Solutions Enabled by Technology and Automation
Meeting the challenges of managing an advertising compliance program can be far easier with effective use of technology and automation.
- Obligations imposed by Rule 17a-4 of the Exchange Act and Section 206 and Rule 206(4)-1 of the Advisers Act can be efficiently met by automating processes with an advertising review workflow system.
- Automation can ensure adequate retention and timely and documented review of advertising materials under Advisers Act rules and extensive no-action letter guidance.
- Effective storage solutions will allow users to confidently search and provide requested advertising materials to regulators upon request.
- A proactive approach to compliance can be supported by automatically alerting the advertising submitter via e-mail of impending approval expirations and sending notifications containing a summary of expiring pieces to a designated administrator.
- Approved advertising material can be published to private library of its creator or community libraries for easy retrieval and management.
- If submission to FINRA is required, an automated solution can efficiently submit materials from multiple file types in accordance with the AREF system’s PDF requirement, automatically retrieve responses, and notify submitters.
- An automated workflow can provide managerial reports to measure the review process. Statistics can include the duration of the review cycle for a group of submissions within a date range for a reviewer or group of reviewers.
A communications and advertising compliance review program is essential and the challenges in creating and implementing an effective process are significant. Documentation must be properly retained, processes must be followed consistently, and all must be done quickly and efficiently. Fortunately technology and automation can help meet these challenges and reduce regulatory risk.