- Chief Compliance Officer and VP of Legal Affairs, Arrow Electronics
By 
Aaron Nicodemus2022-12-06T20:43:00
The Division of Examinations at the Securities and Exchange Commission (SEC) issued a risk alert detailing recent issues observed by inspectors regarding compliance with the agency’s identity theft red flags rule.
The risk alert, issued Monday, aims to help registered broker-dealers, investment firms, and certain investment advisers enact effective policies and procedures to comply with Regulation S-ID, which was implemented in 2013 by the SEC and Commodity Futures Trading Commission as part of the Dodd-Frank Act. The rule requires registered entities to develop and implement an identity theft prevention program for covered accounts that includes how a firm finds possible identity theft attempts and handles them.
Through their reviews, SEC examiners identified noncompliant practices by registered entities that may leave retail customers “vulnerable to identity theft and financial loss,” the alert said. Examples included:
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Broker-dealers complying with anti-money laundering/countering the financing of terrorism requirements put forward by the SEC must be mindful of the resources they are providing for their programs during the current heightened risk environment.
Investment advisers newly registering with the SEC have been observed not devoting sufficient resources to their chief compliance officers, sometimes ladling additional responsibilities on the role that take away from time to focus on compliance.
The Securities and Exchange Commission separately settled charges with three financial institutions that each allegedly failed to provide reasonable policies and procedures to identify relevant red flags of customer identity theft.
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