When it comes to compliance these days, the message from regulators is clear: Attention must be paid.
Which is why a product designed by Hingham, Mass.-based Protegent is garnering interest in the broker/dealer world. Wachovia Securities is the biggest broker to sign up to use the compliance software.
The Web-based broker auditing software is designed to cut down on paperwork and raise red flags for branch managers when inappropriate trades are entered or errors made.
“Sometimes there's just a clerical error, but what it does is generate a phone call to the rep to find out what's going on,” says James Cort, head of compliance at Red Bank, N.J.-based Montauk Financial, which has been using the product for about five months. “Nine times out of 10, a rep will say, ‘How did you pick this up?’”
The software lets branch managers run compliance reports on their brokers as well as exception reports. It also uncovers underdiversified client portfolios and portfolios that don't match a client's risk tolerance.
Protegent founder David Tilkin says the idea for the product grew out of his frustration in dealing with the paperwork to properly supervise reps. “There's no reason to accept inordinate amounts of incremental risk when there's a better way,” says Tilkin.
The system archives trade reports as well as comments and notes by managers. It can be used on a branch, regional or national level.
Other firms using the product include Wells Fargo, Stifel Nicolaus, McDonald Investments and Syosset, N.Y.-based Kirlin Securities.