BD DISREGARDED CUSTOMER ID PROGRAM FOR JOINT ACCOUNT HOLDERS

The SEC ordered a broker-dealer to pay fines and appoint an independent consultant for failing to verify the identities of secondary account holders. The SEC charged that the failure violated the firm’s own policies and procedures and the PATRIOT Act’s customer identification requirements. The firm did submit new customer information to a third party vendor for verification but failed to include secondary account holders in joint accounts. The firm failed to take action to fix the problem for several months following communication of the failure to senior compliance and management personnel. It appears that the failure was the result of how batch files were delivered to the third party vendor.

OUR TAKE: Many times compliance problems result from the limitations of technology to execute the undertakings made in a firm’s compliance policies and procedures. Compliance officers should work closely with operations and IT teams to integrate their activities.

http://www.sec.gov/litigation/admin/2008/34-58250.pdf