The SEC's Office of Compliance Inspections and Examinations has issued a "National Exam Risk Alert" concerning a broker-dealer's obligations with respect to master/sub-account trading models.  OCIE says that it has "significant regulatory concerns" that such arrangements could allow money laundering, insider trading, market manipulation, and unregistered broker-dealer activity and also raises information security concerns.  OCIE reminds broker-dealers that they must adopt and implement risk management controls and supervisory procedures under the new Market Access Rule (15c3-5).  As best practices, OCIE recommends implementing appropriate "know-your-customer" procedures, monitoring trading patterns, insuring physical security, conducting training, and documenting all controls and procedures.

OUR TAKE:  We didn't know that OCIE issued "National Exam Risk Alerts."  Regardless, broker-dealers should take heed of OCIE's warnings.