WASHINGTON -- Banks' securities sales are under increasing scrutiny by regulators, so compliance officers need more support from senior management.
It's not always easy to get, so when approaching his boss, compliance officer James Angelos takes along some leverage: regulatory liability, legal costs, and adverse publicity.
Those are negative effects of ignoring compliance responsibilities.
"If you're having trouble being heard" by senior management, said Mr. Angelos, vice president and director of compliance at First Union Brokerage Services, Charlotte, N.C. "put it in those terms."
Mr. Angelos knows what he's talking about. This month, a former First Union broker filed a claim with the National Association of Securities Dealers, charging the company with using deceptive practices in selling investment products.
"Maybe next year I can tell you what happened if I don't have a heart attack by then," Mr. Angelos said at the Bank Securities Association's national compliance conference here.
Rose Marie Mustsin, vice president for compliance at First Commerce Bank, New Orleans, said that, because a compliance culture is built from the top down, officers and chief executives must work together on strategy.
"It's a matter of educating the senior management," Ms. Mustain said. The interagency guidelines on mutual funds published in February have helped get the compliance officer's point across, she said. "You can use that as a selling tool."
But chief executives aren't the only ones at an institution that must be involved in the process.
Compliance officers should develop relationships with sales people, broker-dealsers, and marketing people, Ms. Mustain said. The sales and marketing teams have direct contact with customers, she said, and must understand regulations. The brokerdealers are important because they are deciding what new products and services the institution will offer, Ms. Mustain said.
Mr. Angelos, whose department spends most of its time answering customer complaints, said all employees need to be better trained. He said he is constantly getting questions from workers about what they can and cannot do - and what they need to disclose.
"When a rep says, 'What's a tranche?', and he just sold a 90-year-old, blue-haired lady a collateralized mortgage obligation, I say, 'We're in trouble,'" Mr. Angelos said.
Although First Union does buskins in 32 states, 95% of its compliance problems arise in Florida, Mr. Angelos said.
That's because the Sunshine State has so many senior citizens, he said. And the institution's odds aren't good, he said; six times out of 10, the investor will win the suit.
