Moving to the "more open" COVID environment - documenting what you did while at home

There are any number of webinars out there on preparing for the post-COVID regulatory inquiry world. DCM wanted to add a little emphasis to the message being sent. One of the simplest and best places we have found to look is the May 28, 2020 guidance issued by FINRA. For those in the commodity space, FINRA is the Financial Industry Regulatory Authority in the US - it is the self regulatory authority ("SRO") for the New York Stock Exchange (formerly the NASD). The piece was only four pages and while focused on some of the regulatory requirements for registered entities, it still has a number of interesting points. Also, the SROs in the US are an avenue for insight into what the regulators are thinking and, frequently, meeting the SRO guidance is a big step up towards meeting regulator expectations.
There were a number of things in particular that seemed good to document if you have undertaken them or to have staff document if they were supposed to take actions. These are:

• Documenting if you provided specific VPN or other secure connection capabilities to avoid people intercepting electronic information from the internet connection at your staff remote locations and documenting that your staff always used those connections;
• Documenting that no staff member had a potential conflict of interest with a family member also working at home - does a family member or other occupant work for a competitor or other conflict?
• A point FINRA raised was the concept of "over escalating" issues - stressing to supervisors and staff that it is even more important to document and escalate concerns. There are a lot of concerns that might be handled by a short conversation in the office that may now need to be documented and resolved. FINRA also suggested changing trade surveillance thresholds to increase the sensitivity of reviews and alerts. They also raise the idea that remote cameras or multiple daily check ins may be appropriate.
• A lengthy discussion of how a firm should approve trader at home operations including such things a supervisor review of information latency at the staff location
• Increased requirements for supervisors to create and complete checklists on each remote trader's operations.

In sum, this guidance indicates that FINRA doesn't think "supervision as normal" is appropriate in the COVID relote working environment. The simple question is whether a firm has assumed its pre-COVID supervision environment is adequate in the COVID environment. FINRA Is letting you know they don't think that is correct.

You can find the FINRA guidance here

DCM is a commodity and supply chain consulting firm with experience in all aspects of the tradeable commodity environment - from business strategy, trade operations, supply chain analysis for commodities, risk and compliance operations and market entry and exit. Please feel free to reach out to us with questions or assistance, we are happy to talk with industry participants.