SIA SHOW: Protegent Releases BrokerAudit Version 3.0 for Firm-Wide Compliance

BrokerAudit 3.0 is Web-enabled for deployment on a firm's intranet for analysis, supervision and reporting. Dave Tilkin, president of Protegent, points out that recent industry events have created an increasing interest in automating compliance issues.

Working with input from clients and regulators, enhancements to the BrokerAudit platform include modules to more specifically address money laundering, electronic workflow and sub-firm-logic components. "We're trying to give a lot more flexibility to the end user," says Tilkin. "The enhancements give more control over the rules engines for broker/dealers of securities firms to customize the analysis to more specifically meet their business objectives." To achieve this, BrokerAudit 3.0 has incorporated what Tilkin calls sub-firm logic, which brings together the separate rules engines for each department under a single platform implementation.

As an example, Tilkin says that at Wachovia, which has recently become a BrokerAudit user, the firm has an independent representative channel, a full-service-brokerage channel, a bank-brokerage channel and a clearing company all within the firm. Previously, Wachovia would have had to deploy four separate BrokerAudit systems. "Now, a single deployment of BrokerAudit 3.0 will allow them to respond to each of those four divisions," says Tilkin.

He adds that the latest version was a major rewrite and redesign of the database structure. "But the interest we've gotten has come almost exclusively from the really large securities firms so it was obviously a requirement for the single deployment to address the issues of all departments," he says. In addition to Wachovia, recent BrokerAudit clients announced at the show include First Union, Wells Fargo Investments, Montauk Financial Group, Stifel, Nicolaus & Co. and First Clearing Corporation, which will be deploying the BrokerAudit technology out to their correspondent broker/dealers.

BrokerAudit version 3.0 also extends the user base down to the registered-representative level, in addition to the branch manager, compliance officers and principals that have traditionally made up the user base for the platform. "The registered reps are going to be able to participate in the electronic-workflow capability to address compliance or supervision inquiries," says Tilkin. "And then we're also delivering value-added types of things for the reps as well."

On a high level the BrokerAudit platform allows user firms to monitor broker behavior, monitor the quality of supervision, accommodate the firm's business rules, take into account client profiles and stated risk tolerance and allow the prioritization of risk events. These tasks are accomplished at different user levels. For example, a compliance officer might use the system to scan across the firm for excess behaviors, enter compliance notations against agents and communicate compliance actions with other compliance officers, line managers and officers. A line manager might then use the system to scan their business line for excess behaviors and acknowledge daily alerts and trade-blotter activities, as well as enter compliance notations against agents and communicate those appropriately.

Tilkin adds that BrokerAudit automates a task that has traditionally been manual and required significant capital set aside. "If you look at the cost, on average, securities firms will see it cost about $130 per rep per month for compliance, supervision and litigation issues," says Tilkin. "Many firms will set aside about 1.5 percent of top-line revenue as a legal reserve ... so you're dealing with billions of dollars every year in litigation and sales-practice issues. That's a number that we're trying to drastically reduce." Existing BrokerAudit users will be transitioned to the 3.0 platform, which will be made generally available in September.