Our recent post on the Blaze Portfolio blog about trading compliance examines the importance of monitoring and updating compliance rules and using pre-trade compliance software to heed SEC risk alerts. Using the wrong software and monitoring tools can turn compliance regulation into a dangerous game for advisors. Luckily, Blaze Portfolio understands the challenges surrounding compliance regulation and offers solutions to trading compliance issues. Below are some of the benefits that advisors experience when using Blaze Portfolio, related to both regulatory SEC requirements and non-regulatory trade compliance rules.
Solutions to Trading Compliance Issues – Regulatory Compliance / SEC Requirements
Tracking and Reporting ‘Best Execution’ Compliance
To satisfy SEC regulations (and naturally, to keep clients happy), advisors are obligated to seek the best execution of orders that is reasonably possible and are required to regularly track and report compliance. For best execution, factors including “the opportunity to get a better price than what is currently quoted, the speed of execution, and the likelihood that the trade will be executed” must be considered.
A risk alert from the SEC’s Office of Compliance Inspections and Examinations (OCIE) deemed ‘best execution’ compliance issues as a top examination priority for 2019. The OCIE highlighted other factors to consider and frequent ‘best execution’ issues, as well as the top, suggested practices, many of which Blaze Portfolio can automate. With Blaze, advisors can even conduct complimentary reporting and a Transaction Cost Analysis (TCA) to ensure ‘best execution’ compliance.
Regulations for Personal Trading by Advisory Staff
Another area of concern and examination from the OCIE is the regulation of trading by advisory staff. Relevant risk alerts were released throughout 2019, but the base rule regarding advisor trading has been in place since 2004. The rule requires advisors to report personal securities transactions and, among other things, advisors’ supervised persons to report their personal securities transactions. To support these requirements, Blaze Portfolio keeps all transaction records and makes them available with simple, easy-to-use reporting tools. Blaze can also help to implement an approval process for advisor trading, as investing in some securities requires pre-approval.
Solutions to Trading Compliance Issues – Non-Regulatory Compliance
Adhering to Trading Restrictions
Other trading compliance issues are at the very core of advisors’ duties, like communicating with clients and following their restrictions. Advisors need to prevent trading of securities that a customer has directed them to hold on to, and Blaze can set rules to prevent trading these legacy assets.
Advisors must also be prevented from buying specific assets such as tobacco, alcohol, firearms, etc, and any impact investing must be diligently tracked and reported. Blaze Portfolio offers solutions to trading compliance issues regarding socially responsible investing and impact investing by preventing the trade of restricted assets, applying trade restriction rules, and offering transparent reporting.
Monitoring Asset Allocations and Cash Requirements
Complying with client restrictions can be simplified by Blaze Portfolio in other ways, too. Advisors must ensure that clients’ investments stay within specified investment asset allocations, which should be appropriate to clients’ risk profiles, and that client cash needs are accounted for and trades are adjusted accordingly. The capabilities of Blaze Portfolio can make these processes less manual and time-consuming. With drift analysis monitoring, Blaze can ensure client investments stay within guidelines. And with cash requirement monitoring, Blaze can help to simplify cash management for advisors.
Using Blaze Portfolio for Compliance Monitoring and Reporting
Technology like Blaze Portfolio can provide solutions to many day-to-day challenges that advisors face, including trading compliance requirements. For more information on how Blaze can help monitor, balance, and manage client portfolios for investment professionals, please schedule a demo of the Blaze Portfolio solution to answer any questions.