When there are headlines about big Wall Street firms shooting themselves in the foot and getting fined, the general public’s reaction is something like “Figures. Serves ‘em right.”
That’s definitely not the reaction we had here at Seismic when we saw the story earlier this week about Merrill Lynch getting a $2.5 million fine for compliance infractions. We were collectively shaking our heads because we know that this episode didn’t have to happen, especially in 2015 with the tools available to avoid these infractions.
Small missteps, big trouble
Here’s what happened. During internal meetings held in Boston in January of 2013, Merrill Lynch, the brokerage unit of Bank of America, had internal consulting teams present to a group of over 300 staff advisors. One of the topics was how advisors could grow their businesses by managing more services for their clients.
The problem stemmed from the presentations, which included a section on transferring client assets from commission-based vehicles to fee-based, fiduciary accounts. The issue was that the presentation slide decks didn’t include the necessary language– in compliance notices– about ensuring the “suitability” of these changes for clients. Despite the presentation materials not being approved in advance by Merrill’s “Internal-Use Compliance Team,” they were used at the sessions nonetheless.
Good intentions, but…
From the outside, the Merrill situation looks like a classic case of what can happen when the hectic pace of marketing and sales activities butt up against the thorough and careful processes run by compliance teams. Bottlenecks happen. And given the urgency of meeting deadlines, people find ways around those choke points. When people cut corners, problems can slip through in the process. Most often there’s no malfeasance involved, just well-intentioned efforts to deliver on time.
Better approach is within reach
The solution to these problems–finding the easiest and fastest way for staffers to produce collateral materials– may also be the compliant way. The two do not have to be at odds: solutions that automate the majority of these processes, such as supplying templates that have been pre-approved by compliance teams for various use cases, are readily available to financial services firms.
When under the gun, people will tend to opt for the easiest, fastest and most direct route to their objectives. The trick is making sure that their route of least resistance always leads down a compliant path. It’s 2015; we have the technology needed to make it so.
