HOLLYWOOD, FLA. Banks are not actively engaged in overseeing their broker-dealers, and regulators are taking notice.
When banks pretty much give the keys over to the broker to let them run the program through their organizations, thats not what we want to see, Stephanie Boccio, a national bank examiner and asset management risk specialist at the Office of the Comptroller of the Currency, warned advisors at BISAs annual convention. We want to see active engagement of the bank having oversight.
That might mean pulling together a committee of multiple disciplines where the bankernot the brokeris in charge. Bankers also need to be more proactive in getting appropriate information from brokers and in analyzing sales production data to make sure that certain products are not skewed, according to Boccio.
Brokers, meanwhile, must be willing to pony up some information for the banks as regulators are going to be pushing harder, she said.
The expansion of the product set to include investments such hedge funds, private equity and structured products is also raising concerns with the regulator. Are these the products you want sold through your banking department? she asked. She urged bankers to have veto power over the products being offered.
Boccio noted that the decision regarding products offered on the banks platform is often driven by payouts. She urged bankers to work with broker-dealers to try to neutralize the payouts, so that certain products arent favored over others.
She also raised concerns about firms doing both transactional and fee-based business, citing the difficulty in dealing with both a suitability and fiduciary standard. Can an advisor, she asked, change hats between the two standards? Make sure youre comfortable with that, she said.