Burned Once… Using KRIs to Avoid Litigation and Vice Versa
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Transcript of Burned Once… Using KRIs to Avoid Litigation and Vice Versa
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Burned Once…Using KRIs to Avoid Litigation
and Vice VersaJoan R. Dindoffer
VP and Chief Compliance OfficerPrivate Fiduciary Services
Comerica BankDetroit, Michigan(313)222-9386
[email protected] 31, 2010
Note: The views expressed are those of the presenter, and not Comerica.
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Burned once, shame on you.Burned twice, shame on me.
• Learn from mistakes.– Litigation– Complaints– Audits– Regulatory Exams– Media Reports– Reported Cases
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Pay attention to potential risks at each step in the life of an account.
• Account Acceptance– Assets– Expectations– Circumstances of appointment
• Account Reviews– Initial Post Acceptance & Annual– Administrative & Reg 9
• Discretionary Distributions
• Complaints
• Litigation
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No surprises!
• All the signs were there:
– Account Reviews– Discretionary Action Minutes– Complaint Logs
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Caution Signs
• Concentrations• Own bank stock• Other conflicts• Alternative investments• Closely held assets• Real estate• Performance• Depletion of principal
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It’s not always what it seems.Also look for these red flags:
– Family dynamics– Squabbles over tangible personal property– Step families– Substance abuse– Spendthrifts– Significant distributions– Unequal distributions– Depletion of principal– Liquidity needs– Account pledged as collateral for bank loan– Difficulties with prior trustee
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T.A.R.P.(the kind you CAN control)
• Track and Trend– Track by officer, market, business unit, product line, amount of
exposure, how surfaced– Trend over each of these criteria
• Analyze for pervasiveness and root cause
• Report to management and independent compliance oversight committees
• Program changes to mitigate risk including enhancements to systems, policies & procedures, controls, and training.
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Identify the ROOT CAUSEof the complaint, loss, or claim.
• Customer service
• Investment performance
• Appropriate investment objective
and adherence thereto
• Poor administration
• Documentation
• Communication
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Sample Forms
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Is it
Systemic?Pervasive or
Potentially pervasive?Isolated?
• Fix System• Revise
Procedures/Process
Analyze the problem.
• Look for system defects
• Policy, procedure & process gaps
• Widespread unfamiliarity with policies
• Flagrant disregard of policies
• No perceived issue• Individual training• Supervision• Conscious business
risk
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Jump into action, before history repeats itself.
• Immediate claims-best controlled with prompt attention.
• Extrapolate globally to:-Fix systems-Address control gaps-Enhance policies and procedures-Train-Sensitize management to business risks-Address identified pockets of personnel and supervisory issues.
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When all else fails
• Follow these common sense axioms from
“Poor Joan’s Almanac.”
(With apologies to Ben Franklin.)
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“Mean what you say, and say what you mean.”
• Make sure you are following the terms of the governing document, including all amendments, codicils, and court orders.
• Make sure you follow your policies and procedures. Don’t establish unrealistic standards.
• Follow through on correspondence. Under promise, over deliver.
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“Document, Document, Document.”
If it’s not in writing, it doesn’t exist.
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“Keep your friends close, and your clients even closer.”
• Know your customer.
• Know the family dynamics.
• Be alert to changes in habits.
• Over communicate.
• Verify client authorizations.
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“Two heads are better than one.”
• Dual control over– Security of physical assets, medallion stamps,
checks.– Secondary approval of address and statement
changes.– Oversight of transaction processing
• Trading errors• Wire instructions• Reconciliations
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“Work smarter, not harder.”
Complaints,Losses & Litigation
ImplementMitigatingStrategies
•Policies•Controls•Training
Prevent
Report, TrackTrend & Analyze
for Themes
Predict Risk &Establish KRI’s
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Questionsand
Comments
Thank You!