Strengthen Your Surveillance Program Through Compliance Best Practices

When establishing a surveillance program, everything begins with a thorough understanding of the firm itself—that is, the lines of business your firm is in and where it is operating, both in terms of physical location and the systems employed. 

Best practices include documenting the surveillance program through written supervisory procedures (WSPs), including how frequently the firm conducts a risk assessment to search for business, regulatory, and technology risks. Procedures must clearly explain to both compliance teams and the firm’s broader employees how to monitor material non-public information, address personal account dealing, and manage potential conflicts of interest.  

Beyond the monitoring of personal trading, firms must also consider how and where trading is conducted, working with both the business and technology to ensure all data necessary to identify possible market abuse is adequately sourced and stored. 

Of course, regulators remain laser-focused on the means of communications themselves, not only expecting all the appropriate books and records rules are being followed, but also examining how potential instances of off-channel communications are being reviewed. 

Across surveillance systems, ensuring the ongoing capture of all necessary trades and transactions, electronic communications, and reference data is key—as is regularly revisiting various parameter settings to ensure these remain fit for purpose. 

Further questions to ask yourself when reviewing your surveillance program include: 

• Have you regularly tested and calibrated your systems – both compliance-owned systems and the upstream business systems that feed them? 
• Can you justify or explain any inclusions or exclusions of specific surveillance models? 
• Are your alerts transparent and easily explained? 
• Do you have enough time to spend on the alerts worthy of review rather than focusing on clearing out the “noise”? 
• Is your coverage comprehensive? 
• Do your surveillance systems cover all necessary asset classes? 
• Are all business-related communications and channels covered by your surveillance systems? 
• Does your surveillance program follow through to your systems more broadly—if you prohibit, for instance, the use of specific channels, do your systems monitor for this? 
• Is it tailored to specific trading strategies, where applicable? 

WSPs must also make clear who is responsible for each action, how exceptions will be reviewed and documented, and when issues are surfaced, the mechanisms for escalation and disposition. 

Keeping a robust surveillance program current means maintaining constant vigilance, which combines a macro understanding of your firm’s business with close attention to your many and varied detailed requirements. 

For the compliance team, the work never actually finishes. 

Download Our Surveillance Program Gap Analysis Checklist 

Surveillance requirements are as varied as the firms which deploy these tools. Though there is no “one size fits all” approach, we have updated our Gap Analysis Checklist for a Tech-Enabled Surveillance Program to help compliance officers work through their particular requirements.