Thursday, September 29, 2011
SIFMA released a set of best practices for its member firms to provide guidance to broker-dealers on engaging and interacting with expert networks and their associated consultants. SIFMA’s best practices include:
- Core Assessment. Firms that use expert networks should develop policies and implement procedures concerning the use of expert networks and the consultants identified by the expert networks.
- Training. Firms should provide training for their employees and other affected individuals who interact with expert networks.
- Role of Firm Supervision. Firms’ systems of supervisory oversight should be designed with a view of securing an understanding of a firm’s use of expert networks and their associated consultants.
- Firm Monitoring and Oversight. Firms should develop policies and procedures, or supplement existing politics and procedures that require firms to escalate for review and take appropriate action on “red flags” that become known to the firm.
- Agreement Between the Firm and Expert Network. Firms should favor written agreements with expert networks for repeating and/or substantial arrangements.
- Advising Consultants of Firm Policies. Firms should develop procedures, on a risk-assessed basis, for directly advising consultants associated with expert networks on firm’s policies regarding the use of material non-public information and confidential information, at the outset of any new engagement of a consultant.
- Additional Firm Policies and Controls. Firms should develop procedures obtaining from the expert network or a consultant, relevant and non-confidential information regarding any employment and/or other arrangements where the consultant may have access to material non-public information and confidential information.
SIFMA also advises firms to consider whether the best practices may have applicability to situations where firms have direct relationships with consultants.