Compliance continues to reign as a top priority and important hurdle for broker dealers. According to an Albridge Solutions, Inc. whitepaper, the growing use of social media, the increasing scrutiny of FINRA, and the consequent rising in compliance costs are putting pressure on the compliance departments and bottom lines of broker dealers. The result? A move to adopt automated compliance systems is gaining steam.
Social media, FINRA, and compliance cost pressures
Social media, which due to largely unclear guidance from FINRA was ignored by broker dealers in the past, has now been largely adopted following further clarification of FINRA’s social media guidelines. However, with increased usage comes the burden of surveillance and recordkeeping. Consequently, broker dealers in the survey listed social media as one of the top five challenges they face.
Additionally, concurrent with FINRA’s increased guidance on social media is a rise in its regulatory reach. Fines imposed by FINRA increased 51% over 2010, while disciplinary actions increased 13.6% over 2010. And FINRA’s reach isn’t just getting broader; it is also “delving into more details, with less tolerance for deviations from regulations and norms.”
The white paper notes that as a result of the challenges social media and FINRA pose for compliance departments, broker dealers have seen compliance costs rise in the past two years. Compliance staffing was found to have increased by more than 11% for 55% of the surveyed firms, while 14% of firms spent between 10% and 20% of overall revenue on compliance-related expenses.
The pragmatic decision to automate
So, how are broker-dealers coping with these compliance pressures? The study notes that an increasing number of broker dealers are making a pragmatic decision to transition from manual to automated compliance systems. For comparison, 30% of surveyed broker-dealer firms in 2010 used fully automated systems for compliance while 42% utilize these tools today. Besides the obvious cost savings in staffing, automated compliance systems also decrease the risks of FINRA violations as well. This is because, according to Gregory Pacholski, the CEO of Albridge, states that “reliance on outdated processes and legacy systems creates extra costs and often results in lower service levels, longer processing times, higher error rates, and increased risks.”
So, as broker dealers try to control compliance costs under the increasingly watchful eye of FINRA, the solution is clear: automation. As means to cost and risk minimization, automated compliance tools are second to none. Meanwhile, those broker dealers relying on manual compliance systems will face an ever-tightening squeeze on their resources. Let ArchiveSocial help automate your social media compliance strategy. A fully FINRA-compliant archiving solution, ArchiveSocial makes social media recordkeeping simple, cost-effective, and robust.
