Compliance Examination
Categories: Regulations, Tax, Investing
To enforce the rules of an industry, there have to be examinations or inspections to ensure that the rules of that industry are being adhered to by all. Duh.
In the Wall Street-y finance world, the big kahuna of compliance exams is the Series 7...available here on Shmoop for a small fee. And now, the new-and-improved (Jenny Craigified) SIE exam.
A compliance examination is the annual bushwacking delivered by compliance officers to the hierarchy of offices from Federal offices down to your local offices. The examinations are periodic, usually annual.
However if problems are noted, the examinations become more often, quarterly or monthly, until the problem or problems are solved. Some examinations or inspections are required to be surprise visits (10%), but most are scheduled in advance. In most cases, if you fail the first time, you are allowed to try, try again. As long as you can turn your head and cough.
The intent of the examination is to determine whether or not the rules, policies, and procedures are being adhered to, and ultimately that the federal regulations are implemented and followed. Every office being inspected is to function as though every day was going to be an inspection day.
"...The price of liberty is not so much eternal vigilance as eternal dirt.” George Orwell
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Finance: What is a Compliance Department...0 Views
Finance allah shmoop what is a compliance department You know
that karate or tai chee move where the guy has
your wrist bent all the way back and he's looking
at you like your dinner Yeah uncle Well in this
case he's the compliance department and you're you know complying
well the same holds true in corporate ranks There are
myriad laws not just in the securities business that executives
everywhere have to follow Or this happens Well compliance department's
comprise lawyers who have like a thousand eight hundred ninety
seven things they check to be sure that your complying
with regulations so like you're a sales exact you sell
routers mostly the banks So that's super expensive dinner on
your expense account What was that for And what exactly
could you have been doing Business related at magic marty's
exotic dance club That company rules what happened That was
on the cover of the wall street journal How do
you feel then Yeah comply Don't go there next All
right You're a mutual fund manager You're visiting up big
telecom company and you're slowly getting rid of the coffee
pete's house Blend the three cups of it that you
had two hours earlier Well from the next stall you
over here The ceo of the telecom company on his
cellphone among other noises Talking to his banker about the
twelve dollars a share premium he hopes to get when
a t and t buys his company Can you quickly
put in an order and buy shares No And in
fact you have call your compliance department as soon as
you're you know done and halt any trading your fund
was doing in the stock as you now have very
inside information Alright well complaints applies also to the way
forms get filled out the way travel is paid for
Any quote favor unquote over and above About ten bucks
worth all that's Something that has to be run through
the compliance department lawyers to be sure that your behavior
is you know complying And the same happens for complex
stock trades as well like you work in a hedge
fund with a risk manager of the compliance department A
little bit different Kind of complying there you're down eighteen
percent on a trade you made just two weeks ago
What do you d'oh Well guess what By charter of
your hedge fund or the indenture on it or the
contractual agreement you set up with your investors you have
to sell Now even though you think it's a screaming
by here down eighteen percent you clearly didn't know what
you were doing when you bought the stock at one
hundred bucks a share And now it's you know eighty
two And so now you must comply with your bylaws
and sell and take your losses Because complying is not
an optional thing that you just picked the follow or
not When you feel like it You know kind of
like romantic relationships used to be before tinder was invented