The Securities Industry and Financial Markets Association is recommending a number of best practices for financial firms that work with Expert Networks and their Consultants.
According to SIFMA, expert networks are entities that receive a fee to refer industry professionals, known as consultants, to third parties. Although the acknowledges how helpful these networks can be in helping broker-dealers implement and design investment strategies while offering advice, information, market expertise, analysis, or other expertise in making investment decisions, SIFMA General Counsel Ira Hammerman said in a release that these best practices should help with compliance while helping avoid what could like “impropriety.” The government has recently targeted them when investigating insider trading.
Among the recommendations:
1) Establishing policies and procedures for how to use Expert Networks and Consultants. SIFMA is recommending a risk-based approach for figuring out what controls should be put in place.
2) Providing training for associated persons that deal with Expert Networks and Consultants on matters such as insider training, information barriers, confidential information, conflicts of interest, or material, non-public information (MNPI).
3) Ensuring that supervisory oversight is integrated into a financial firm’s use of Expert Networks and associated consultants.
4) Setting up policies and procedure that mandate that financial firms act quickly on “red flags” that may indicate there is a possibility of disclosure of confidential information of conflicts of interest or MNPI.
5) Establishing written agreements with Expert Networks over arrangements that are substantial or repeating in nature, such as those involving making sure that Consultants are checked for securities law violations, preventing Consultants from revealing MNPI or Confidential Information, requiring that Consultants undergo periodic training or communication about certain restrictions, and requiring that Consultants are periodically certified as to the adherence of these limits.
6) Setting up procedures on how to advice Expert Networks-affiliated Consultants about Confidential Information and MNPI.
7) Establishing procedures for getting non-confidential, relevant information from an Expert Network or one of its Consultants about employment and arrangements where a Consultant may have access to Confidential Information or MNPI, as well as setting up appropriate controls for assessing risks of dealing with Consultants that work with Expert Networks that have Confidential Information or MNPI.
In providing these best practices, however, SIFMA wants to make clear that these are only intended as guidance and are not mandates for how financial firms must work with Expert Networks and Consultants.
If you are an investor that has suffered losses you believe were caused by broker misconduct, you should talk to a securities fraud attorney right away.
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Our institutional investment fraud lawyers can help you determine whether you have grounds for a claim or lawsuit.