During the relevant period, under the firm's AML program, Rensvold, as the firm's AMLCO, had "full responsibility for the firm's AML program," and was responsible for monitoring the firm's compliance with AML obligations, overseeing AML-related communication and training for employees, and filing SARs. Although the firm's business model changed dramatically during the relevant period, Rensvold did not take reasonable steps to establish and implement an AML program tailored to the firm's new business lines. The firm's AML procedures provided that the firm "will monitor account activity for unusual size, pattern or type of transactions, taking into account risk factors and red flags that are appropriate to [the] business." 

Although the procedures listed types of securities transactions that could be considered red flags, including "wash or cross trades" and transactions involving "penny stock companies," there were no procedures as to how Planner would review for red flags related to its low-priced securities business. Further, Rensvold failed to reasonably train the firm's employees regarding how to conduct reviews for suspicious transactions. 

Planner did not use any exception reports or automated tools to monitor customer account activity for suspicious transactions, including transactions in accounts of customers located in high-risk jurisdictions or who traded in low-priced securities. The firm's review for potentially suspicious transactions was limited to a manual review of transactions. This manual review was unreasonable given the growth and complexity of Planner's new international business lines. The firm's failure to implement an AML program reasonably tailored to its new business lines resulted in potentially suspicious transactions going undetected. 

For example, during the period August 1, 2016 through October 27, 2017, at least one customer potentially engaged in wash sale transactions and two customers may have engaged in other market manipulation (as demonstrated by the customers' market dominance in certain low-priced securities and active trading around press releases). Rensvold failed to detect these red flags. In the instances when Planner's clearing firm contacted Rensvold about suspicious trades, he still did not review the trading or account information. Instead, Rensvold instructed the operations manager to contact the customer for an explanation and then forward the response to the clearing firm without conducting any additional due diligence.  

The Securities and Exchange Commission today announced that it adopted final amendments to certain auditor independence requirements in Rule 2-01 of Regulation S-X.  Informed by decades of staff experience applying the auditor independence framework, the final amendments modernize the rules and more effectively focus the analysis on relationships and services that may pose threats to an auditor's objectivity and impartiality.  

The final amendments reflect updates based on recurring fact patterns that the Commission staff has observed over years of consultations in which certain relationships and services triggered technical independence rule violations without necessarily impairing an auditor's objectivity and impartiality.  These relationships either triggered non-substantive rule breaches or required potentially time-consuming audit committee review of non-substantive matters, thereby diverting time, attention, and other resources of audit clients, auditors, and audit committees from other investor protection efforts. The final amendments result in auditor independence requirements that will be used to evaluate specific relationships and services, with a focus on protecting investors against threats to the objectivity and impartiality of auditors.. . .

Today's modest and tailored amendments reduce or eliminate those adverse effects on auditor choice without detracting from the independence obligations of auditors and issuers. This type of retrospective review and tailored action is important to the continued effectiveness and efficiency of our rules

[W]e understand that the introduction of the materiality standard into the rules, as well as the loosening of other standards, is based in part on the staff's experience in the consultation process.[14] That is, when auditors have violated independence rules in the past and come to the staff to make the case that their independence is not actually impaired despite a "technical" violation, auditors have relied in part on materiality assessments like those that will now be permitted by these amendments. We appreciate the staff's professional expertise and experience, and we believe that expertise is invaluable for assisting auditors in analyzing and making these judgments. By writing this broad standard into the rule, however, we place greater reliance on auditors to decide what is or is not "material." Thus, we rely on auditors to subjectively determine when their own independence is impaired, and we do so without providing specific guidance on materiality.[15] This despite the fact that people and organizations are so often inept at perceiving their own conflicts of interest and/or understanding if or how such conflicts may affect their own judgment.[16] What's more, the rule fails to provide visibility into how auditors apply this standard.

While it makes sense for us to assess how our rules are functioning from time to time and to recalibrate them as needed, we are concerned that the dial for auditor independence is turning in only one direction, and that is towards loosening standards and reducing transparency. We cannot support introducing greater opportunity for error and uncertainty into auditor independence standards while decreasing visibility into how auditors are actually making these judgments. We respectfully dissent. . . .

[I] write separately, however, because I am not fully convinced that the services provided by IDS constitute a "facility" of an exchange under Section 3(a)(2) of the Exchange Act and am concerned that the Commission's analysis in this order takes an overly broad view of what constitutes an "exchange" for purposes of Section 3(a)(1) of the Exchange Act. The order finds that the Wireless Connections are facilities, in part, because IDS is part of a group of persons who, together, maintain the market place that constitutes each exchange, including by providing "a system of communication for the purpose of effecting or reporting transactions on the Exchanges."[3] Under this approach, affiliation with an exchange by a provider of this type of communications service appears to be sufficient to create a presumption that those services are a "facility" of the exchange and, consequently, are subject to the full panoply of exchange regulation under the Exchange Act.

I am uncertain that this is what the statute requires. Section 3(a)(1) of the Exchange Act does refer to "a group of persons . . . which constitutes, maintains, or provides a market place or facilities for bringing together purchasers and sellers of securities," but it is not clear to me that belonging to the same corporate group necessarily makes an affiliate of an exchange part of "a group of persons" in this sense.[4] Depending on corporate structure, it may be possible for an affiliated entity to provide, for example, wireless connectivity services in an arms-length relationship with the exchange, in which case it could be difficult to distinguish those services from similar services provided by unaffiliated providers (such as IDS's competitors in the wireless connectivity space). Similarly, if an affiliate is providing a non-exclusive system of communication in a competitive market, it is unclear how significant a factor affiliation should be in determining whether a provider is treated differently from its competitors. . . .