Surveillance Program Best Practices

When establishing a surveillance program, everything begins with a thorough understanding of the firm itself – i.e., the lines of business your firm is in and where it is being conducted, both in terms of physical location and the systems employed.

Compliance best practice is to document through Written Supervisory Procedures (WSPs), including the frequency with which the firm conducts a risk assessment to surface the respective business, regulatory, and technology risks. Procedures must be clear, both for compliance and the firm’s employees more broadly – as with how material non-public information (MNPI) should be monitored, personal account dealing (PAD) is covered, or potential conflicts are handled.

Beyond the monitoring of personal trading, firms must also consider how and where trading is conducted, working with the business and technology to ensure all data necessary to identify possible market abuse is adequately sourced and stored.

Of course, regulators remain laser-focused on the means of communications themselves, not only expecting all the appropriate books and records rules are being followed, but instances of potential off-channel communications are being surveilled.

Across surveillance systems, ensuring the ongoing capture of all necessary trades & transactions, electronic communications, and reference data is key – as is regularly revisiting various parameter settings which ensure these remain fit for purpose.

Further questions to ask yourself when reviewing your surveillance program include:

• Are the alerts being generated reasonable?
  • Timely?
  • Responsive to market conditions?
• Do your surveillance systems cover all necessary asset classes?
• Does it consider various trading strategies?

WSPs must also make clear who is responsible for each action, how exceptions will be reviewed and documented, and when issues are surfaced, what are the mechanisms for escalating?

In sum, making and keeping current a robust surveillance program means maintaining constant vigilance, which combines a macro understanding of your firm’s business with close attention to your many and varied detailed requirements.

For the compliance team, it’s very much like being on the crew who maintain the Golden Gate Bridge – they never actually finish painting the span, but instead, after reaching one end, simply re-start the process all over again from the other side.

Download our Surveillance Program Gap Analysis Checklist

Surveillance requirements are as varied as the firms which deploy these tools. Though there is no ‘one size fits all’ approach, we have updated our Surveillance Program Gap Analysis Checklist to help compliance officers to work through their requirements.

Download

How we help

ACA’s integrated surveillance solutions are designed to help your firm manage its firm-wide conduct and regulatory risks in a way that meets expectations and industry best practices. Our offerings include consulting, managed services, and technology to provide a holistic solution for developing and executing a comprehensive and truly risk-based surveillance program.

For questions or to discuss how ACA can help your firm strengthen its surveillance program, increase efficiencies through technology, and ensure your regulatory obligations are met, reach out to your ACA consultant or contact us here.