While business booms for independent broker-dealers, potential security and compliance challenges lurk in technology their independent financial advisers use to manage their business. McGuireWoods partners Emily Gordy, Cheryl Haas and David Reidy wrote in a July 2 Law360 column.
They cited as an example the fine that Massachusetts securities regulators levied in December against a New Jersey-based broker-dealer for allegedly failing to supervise registered representatives who mishandled information held in third-party CRM software. It’s not uncommon for financial advisers associated with independent broker-dealers to adopt and use such CRM tools outside their firms’ review and access, the authors noted.
“Firms and financial advisers would do well to assess how these products are used by the firm and financial advisers, how they fit within supervision, compliance and risk processes, and how to ensure that their vendor agreements adequately address breach notification requirements,” the authors wrote.