Broker-Dealer Exceptions (Reg. R)

Use Case for Assessing Risk on Broker-Dealer Exceptions (Reg. R)

Why assess the risk? Regulation R defines the terms used in several of GLBA’s statutory exceptions and includes certain related exemptions. Banks should assess how these requirements will affect their securities activities. Based upon this assessment, the bank may need to develop a strategic initiative that focuses on how to organize and conduct bank securities activities in compliance with the requirements. This strategic initiative should cover comprehensively the effected lines of business and their associated risk control functions. Actions should include establishing effective compliance, internal audit and recordkeeping systems to ensure conformance with the regulatory provisions. Banks should also implement effective bank employee training and ongoing supervision and monitoring of bank employee activities covered by the regulatory requirements. Banks that do not establish effective compliance systems risk exposing the bank to violations of law and regulations for conducting unauthorized securities activities in an unregistered securities broker or dealer.

Who should assess the risks? Credit Financial Officer, Investment Officer, Chief Executive Officer, ALCO

How to assess the risk: Rate the KRIs to determine if a threat would successfully exploit a vulnerability and to justify expenditures to implement countermeasures to protect the bank’s assets or reputation. Use the “Focus Risk Assessment” tool for in-depth analysis of risks and mitigation techniques.