SEC Sends Reminder to Industry About Confidentiality of Suspicious Activity Reports

The Financial Crimes Enforcement Network issued a final rule, effective January 3, 2011, that amended the Bank Secrecy Act with respect to the confidentiality of suspicious activity reports (“SARs”). The regulations require broker-dealers to make the SARs and any supporting documentation available to any self-regulatory organization that examines the broker-dealer for compliance with the requirements of the SAR rule upon the SEC’s request. On January 26, 2012, the Commission sent a letter to FINRA CEO Richard Ketchum advising that it expects FINRA to implement the SEC’s request in accordance with the SAR rule. On the same date, Carlo di Florio, the director of the SEC’s Office of Compliance Inspections and Examinations, sent a letter to the CEOs of SEC-registered, FINRA member broker-dealers advising them that the SEC has reminded FINRA of its responsibilities under the Bank Secrecy Act and the SAR rule to preserve the confidentiality of SAR materials.

In its letter to Ketchum, the SEC advised that, in accordance with the SAR rule, it requests that all SEC-registered, FINRA member broker-dealers that are subject to examination by FINRA for compliance with the SAR rule make the reports, any supporting documentation and any other information that would reveal the existence of, or any decision not to file a SAR, available to FINRA. The request also applies to FINRA examinations and investigations, including FINRA’s risk assessment effort within its examination program, provided that FINRA takes all appropriate steps to ensure that the SAR, or the existence of a SAR, is kept confidential throughout the enforcement and investigatory process.

Broker-dealers may contact the SEC’s SAR alert message line at 202-551-7277 if they have any concerns about FINRA’s implementation of the SEC’s request. FINRA is required to fulfill its responsibilities under the Bank Secrecy Act and the SAR rule to protect the confidentiality of SAR materials. The unauthorized sharing of SAR materials is illegal and could result in criminal or civil sanctions. Any SRO registered with the SEC, or any director, officer, employee or agent must not disclose a SAR, or any information that would reveal the existence of a SAR, except as necessary to fulfill self-regulatory duties with the consent of the SEC.