Podcast Center
Video Center
Webcasts
Resource Center
Events
May 13, 2011 at 06:11 AM
At an informal post-Madoff breakfast in New York on Wednesday, audit and advisory firm Grant Thornton invited a FINRA regulator to meet with broker-dealers and hash out all the rule changes associated with Dodd-Frank reform.
The mood was friendly enough among the finance professionals in the Hyatt conference room next to Grand Central Station. But the issues that came up for a panel discussion were serious—and reflective of broker-dealers’ uncertainty surrounding audits, third-party custody, newly required compliance examinations and whether threatened U.S. budget cuts will hamper regulators’ lofty goals for scrutinizing BDs’ operations more closely.
“When any regulator sees a rule that another regulator already has, they say, ‘I have to have that rule, but I want to make it stricter,’” said Steven Lofchie, a partner at law firm Cadwalader, Wickersham & Taft, who sat on the panel. “I pride myself on my dislike of Dodd-Frank,” Lofchie said by way of introducing himself.
Lofchie, who noted that “my remarks may make me look anti-regulatory, but I am in fact a regulatory lawyer,” used the Commodity Futures Trading Commission’s position limits rule as his example. Dodd-Frank and the Securities and Exchange Commission have only complicated a requirement that the CFTC had already put into place, he asserted.
Seated to Lofchie’s right was Grace Vogel, executive vice president of member firm regulation with the Financial Industry Regulatory Authority, who had come to the breakfast to talk about the potential impact of proposed FINRA rules on broker-dealers.
Vogel and Lofchie agreed that third-party custody was one of the most important issues—if not the most important issue—that broker-dealers faced since Bernie Madoff was caught cooking his books.
They also agreed that technology has created ample opportunities for people looking to defraud investors.
"Don't be surprised if a FINRA official asks to sit down with someone in your broker-dealer operations and asks them to log into their DTCC terminal to verify specific positions," Vogel said. "At FINRA, we have had examiners doctor documents with Photoshop to show large balances on Chase bank statements to demonstrate how easy it is to produce fraudulent statements."
Also on the docket at the breakfast were FINRA’s regulatory notice 10-44, FINRA’s proposed 10-25 rule governing examinations of operations professionals and an update on matters up for discussion with the American Institute of Certified Public Accountants (AICPA).
The SEC is expected to make amendments to Rule 17a-5 later this year, according to
