It’s 4PM on a Friday. You were hoping to wrap up for the day to start your weekend, but there’s a deal to be closed. The CEO is looking for confirmation that there are no conflicts around outside business activities or any other potential conflicts of interest, and he needs that info stat.
You and the rest of the compliance team buckle down. You divide and conquer to pull information from multiple systems and then meet to cobble all of the disparate data together. It takes a few hours – with the CEO pinging you impatiently for updates the entire time. And throughout the process you’re worrying that in the rush your team missed a key piece of data or made a manual mistake that could lead to backlash down the road. You breathe a sigh of relief when you email the info over to the CEO and head out the door, but you think to yourself, there really has to be a better way.
Does that story sound familiar?
If you work in Compliance, you know what an Outside Business Activity is. You know that they need to be disclosed, and you probably have a program in place to review employee OBA attestations at least annually.
But an effective OBA management program must go beyond just disclosures. Manual collection and tracking is a time-consuming and often frustrating process for both employees and compliance. And if conflicts of interest around outside business activities are not identified and mitigated, there’s significant risk exposure for the firm.
Outside Business Activity: Putting the Spotlight on Moonlighting
Outside Business Activities in the Enforcement Spotlight
The regulators are paying attention. Examples of recent enforcements around outside business activities include:
- US advisor loses job after 18 years at firm for undisclosed side hustle seasonally preparing taxes
- US advisor charged with running ‘small empire’ of businesses and borrowing from a customer without seeking required approvals from his firm
- US broker charged with running coaching business for colleagues
- FINRA fined firm $50K for failure to maintain WSP’s and submit Forms U4 to comply with OBA regulations
- FINRA fines firm for failure to act on red flags regarding employee outside business activity and private securities transactions activity
Some of these stories are egregious examples of an outside business activity that’s clearly against the rules. But in some situations whether or not an activity is against the rules is not so cut and dried.
According to Thomson Reuters, additional investment-related services are often an attempt to provide clients a more comprehensive approach managing their finances. For example, a rep may offer accounting, notary or insurance services — not covered by an adviser’s client protections — in addition to asset management to clients. In a small firm, customers may be looking for their advisors to wear many hats, especially in small towns and rural areas where a wide range of services might not be available.
See how MCO provides small firms with scalable and affordable compliance automation
Streamline the OBA management process
The effective management of Outside Business Activities goes far beyond simply asking staff to fill out an annual form. Firms need a best practices framework that supports the efficient monitoring and disposition of OBAs while flagging exceptions for mitigation. MyComplianceOffice provides organizations of all sizes with a solution to automate the capture and management of Outside Business Activities. MCO’s OBA solution allows firms to:
- Reduce the amount of time compliance spends tracking and monitoring OBAs
- Minimize the risk of regulatory censure
- Discourage bad actors and rogue activities
- Ensure employees are aware of their compliance obligations – and make it easy for then to fulfill them
- Streamline processes and increase efficiency with automation
- Promote a culture of compliance
Plus, centralized data and a unified platform provide a complete picture of employee activity and compliance – not just OBAs – on one dashboard.
Let’s revise our story with a happier ending
It’s 4PM on a Friday. There’s a deal to be closed and the CEO needs confirmation that there are no conflicts right away. You log into MyComplianceOffice and leverage the intuitive interface and integrated data to conduct an automated check across the organization. The information is sent to the CEO with a complete audit trail. It’s 4:15. The CEO is satisfied that they have the data that they need to move their deal forward—and you can start your weekend confident in your compliance.
Want to see how MCO can help your firm achieve confident, consistent and integrated compliance? Download our Brochure on Outside Business Activities and contact us for a demo today!
