Part 1 — $22 Million Worth of Reasons Why It Pays to Comply with Regulatory Organizations

Due to budget pressures, many executives break into a cold sweat at the mention of regulatory compliance. For many organizations, cutting corners takes precedence over meeting the requirements imposed by regulatory authorities such as the U.S. Office for Civil Rights’ HIPAA Privacy and Security rules and the Securities and Exchange
Commission (SEC).

But if you think following regulations can be costly, try breaking them. As Bloomberg Businessweek reported, a recent blunder by financial giant Morgan Stanley earned the firm a $5 million fine in June 2012 from the Commodity Futures Trading Commission and a $1.75 million fine from the CME and the Chicago Board of Trade to resolve claims over
record-keeping violations. It seems you can’t afford not to comply with regulations.

To protect your business from hefty financial penalties and damage to its reputation, you must ensure that your business complies with every aspect of regulatory requirements, whether it be protecting financial or health records, implementing a business continuity plan or providing clients adequate access to their personal information.

Not convinced? In this five-part series, we’ll be sharing more than $22 million worth of real-life examples where companies made the mistake of attempting to fly under the radar and met with regulatory run-ins that resulted in costly fines.

Capital Market Services — $75,000


New York-based Capital Market Services, a futures commission merchant, was slammed with a $75,000 fine from the National Futures Association (NFA) in May 2011.

The reason? After a series of 11 system outages in less than a year, Capital Market had failed to notify either its customers or the NFA of the power failures. As a result, customers were either kicked out of the online system or were unable to log in at all, leaving them unable to create or manage orders.

Under the NFA, Capital Market had been required to have a business continuity and disaster recovery plan in place that allowed for the possibility of a system outage due to activity that exceeded normal peak volume. Had Capital Market employed redundant systems, it could have resolved the issue of the system outages.

As it turned out, Capital Market had at one time employed both a primary and backup facility. However, Capital Market dropped the ball in November 2009, when it severed ties with its primary facility and began using its backup facility as its primary facility. To cut costs, Capital Market did not secure another backup location.

Stay tuned for Part 2!

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