On May 19, Patomak Global Partners hosted a teleforum with SEC Associate Regional Director, Donna Esau and Mike Otten, NFA Vice President for OTC Derivatives, along with Patomak in-house experts. The group focused on how general counsels, chief compliance officers and other legal/compliance team members can prepare for regulatory exams in the current and post-pandemic, virtual environment.
Here are three key takeaways:
Communicate with Your Examiner
Communicating with examiners and establishing a relationship of trust is always important, but it will be especially crucial in the absence of in-person interactions. Firms should transparently communicate challenges, including timing of document production, availability of firm personnel, and any nuances or challenges in pulling information and documents. It is far better to have a dialogue in advance with the regulator about these challenges. Examiners understand that work-from-home presents complications. Communicating early and as appropriate can help firms and examiners reach solutions to avoid challenges down the road.
Prepare in Advance for Examinations
Virtual exams create a greater risk of inadvertently sending mixed messages. It is as important as ever for firms to prepare in advance, including testing technology to ensure it is working appropriately, reviewing materials for consistency, and conducting internal walk-throughs, mock interviews, and prep sessions. Inconsistencies can raise additional questions.
Exam Priorities Remain the Same
Regulators have been using virtual examinations for several years prior to the pandemic and are putting that experience to work now. However, the goals and milestones of exams and the requirements of compliance testing have not changed. While there will be enhanced attention regarding the effectiveness of business continuity plans, exams continue to be risk-based and tailored to each firm’s business models, services, products offered, clients, and unique firm risks.
Patomak panelists included: CEO Paul Atkins; Managing Director Laura Magyar; Director Jamila Piracci; and Senior Adviser Paul Allan Schott.