How to Mitigate Compliance Risk With Automated Employee Trade Monitoring

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Inadequately monitoring employee trading activity can have extremely expensive consequences.

In 2020, Citibank was fined $400 million because it failed to establish effective internal controls related to compliance risk management and data governance. Not long before that, Goldman Sachs was fined $54.75 million for unsafe and unsound conduct in its foreign exchange trading business.  

When it comes to ensuring compliance with internal guidelines and federal regulations, manual “self-reporting” processes are certainly better than nothing. However, wealth management firms that use this time-consuming process to collect and review employee trading activity expose themselves to significant compliance risk.

Accidentally using the wrong criteria for manual data collection can completely invalidate compliance efforts. Even if the right data is collected, the most careful compliance officers are bound to miss potential violations while combing through hundreds upon hundreds of trades and positions.

Automating employee trade compliance monitoring helps ensure your firm never winds up with astronomical fines, reputational damage, and other undesirable consequences of non-compliance. Read on to learn how you can make compliance monitoring accurate, efficient, and easy with Ninth Wave’s 360°’s Compliance Center functionality.

 

Minimize compliance risk and increase efficiency 

Manually poring through employee trading data to find compliance violations is tedious and eats up hours of valuable time. Compliance Center gives compliance officers this time back by using data reconciliation and firm-specific rules to proactively identify potential violations.

How Compliance Center works

  • Employees authorize access to their accounts via a simple web-based workflow. 
  • Data is reconciled and a transaction-level audit trail is created for the wealth firm across all employees.
  • Firms create customized reports highlighting exceptions and potential violations based on firm-specific compliance rules.
  • Email notifications alert compliance officers when exceptions/issues are identified so immediate action can be taken.

 

Compliance Center is part of Ninth Wave 360°, a wealth management financial data hub solution that optimizes financial planning by providing a unified view of managed and held-away client assets. The solution securely aggregates permissioned client account data from a large universe of financial institutions and displays it within existing wealth management systems using application program interfaces (APIs).

With Compliance Center, wealth firms can provide employees with an intuitive, self-service digital experience for collecting financial account data including their trading activity and holding data. Firms can use the collected data to create customized compliance analysis reports to determine if there are any compliance violations.

Firm-level compliance rules are coded into each implementation so exceptions and potential rule violations can be easily identified and incorporated into reports. For example, a rule identifying employees with a high concentration of securities that increase firm risk exposure can be used to create a report that lists these employees along with transaction volumes, positions, and other information.

 

Catch violations before they cause irreversible damage

The last thing busy compliance officers want to do is continually stop to check reports for compliance violations. With Compliance Center, firms can set up email notifications that are triggered when issues are detected. This ensures officers don’t waste time accessing the portal unnecessarily, and more importantly, allows them to catch and address violations before they cause irreparable harm.

 

Enhance financial oversight and the client experience

Using Ninth Wave 360° with Compliance Center provides your wealth management firm with numerous advantages including:

  • Improved compliance oversight: Automated compliance monitoring and alerts ensure firms quickly catch all potential issues so they can be immediately resolved.
  • Enhanced employee experiences: Providing firm employees with visibility into their financial accounts via a single experience gives them up-to-date insights into financial wellness and ensures they maintain compliance with firm rules.
  • Higher productivity: Compliance officers can refocus time spent on tedious manual compliance checks on higher-value tasks such as preventing and addressing violations.

“While wealth management firms focus on growing business and providing superior client service, they can’t lose sight of ensuring employees remain compliant with internal and federal guidelines related to their investment choices. However, enforcing compliance often saddles firms with a continuous time and cost burden,” says Ninth Wave Chief Product Officer Cameron Taylor. “Ninth Wave 360° and its Compliance Center module address these challenges by providing one efficient, secure solution for accessing employee-consented financial account data, monitoring compliance across all firm- and industry-mandated regulations, and providing proactive alerts and notifications.”

Avoid a compliance catastrophe

With the SEC likely to continue to put pressure on wealth managers from a regulatory perspective, comprehensive and accurate employee compliance monitoring is more important than ever. Relying on time-consuming, error-prone manual processes is downright dangerous in an environment where inadvertent oversights can potentially result in a tidal wave of disastrous consequences.

Transitioning to automated compliance monitoring solutions prevents compliance catastrophes. With Ninth Wave 360°, firms ensure potential violations are caught quickly regardless of how many rules and regulations are in effect.

The Ninth Wave team has been helping financial services firms optimize their data and processes for over 20 years. Request a demo to see how Ninth Wave 360° and Compliance Center can help your firm significantly reduce risk by automating your compliance monitoring process.

About Ninth Wave

Ninth Wave delivers secure, seamless, and standardized data connectivity to fintechs and financial institutions of all sizes, through a single point of direct integration to a universal suite of open finance APIs. With configurable controls, visibility, and insights into all data sharing and data acquisition connections between aggregators, third-party apps, and internal applications, Ninth Wave empowers financial institutions and their customers with access and oversight to their connected apps, enabling secure data exchange in a holistic and scalable open finance ecosystem. Offering solutions for retail and commercial banks, wealth managers, credit card issuers, tax providers, and more, Ninth Wave provides unparalleled connectivity and universal compatibility to complex information systems, unlocking innovation, potential, and performance for your data. Contact us to learn more about Ninth Wave’s secure data connectivity features. Empowering open finance. At scale, at last.