Tread carefully when self-reporting

By Bruce Kelly When broker-dealers come clean with regulators and “self-report” any mistakes, they better move carefully. That was the consensus of broker-dealer executives in a panel discussion this morning at the annual meeting of the Atlanta-based Financial Services Institute in Orlando, Fla. Self-reporting in areas such as the retention of e-mails “is more of an art than a science,” said John Simmers, the El Segundo, Calif.-based CEO of the ING Advisors Network, and the potential for mistakes exists. “Watch how you do it.” While broker-dealers have a duty and responsibility to report to securities regulators when problems arise, they should be “cautious,” said Stephanie L. Brown, managing director and general counsel with LPL Financial of Boston and San Diego. When self-reporting, firms “are following the spirit of what regulators want,” said Brian Murphy, chairman of Woodbury Financial Services Inc. of Woodbury, Minn. However, such candor can wind up being costly, he said. Mr. Simmers added that self-reporting is not always horrible, but firms should get help when doing so. Meanwhile, regulators looking at firms’ e-mail has become one of the largest parts of any exam, Ms. Brown said, with LPL producing “hundreds of thousands of e-mails” during an exam.