A compliance officer receives a call from a loan officer who asks for advice on what she should do with a stock certificate (1,437 shares of IBM) from a new loan customer who wants to pledge it in support of a loan that has been approved at your bank. What should the compliance officer tell her FIRST?
Click on the arrows to vote for the correct answer
A. B. C. D.D
The correct answer in this scenario would be option D: Contact the SIC to determine if the certificate was reported as lost, counterfeit, or stolen.
As a compliance officer, the first thing you need to do is to ensure that the bank is not taking in any questionable assets as collateral. Therefore, the compliance officer needs to confirm that the stock certificate is not fraudulent, lost, or stolen. To do this, the compliance officer needs to contact the Securities Information Center (SIC), which is a non-profit organization that helps financial institutions identify lost, stolen, or counterfeit securities.
If the SIC confirms that the stock certificate is valid and has not been reported as lost, stolen, or counterfeit, then the compliance officer can advise the loan officer on the appropriate steps to take to ensure that the bank has a valid lien on the stock certificate. This may include retaining a copy of the certificate in the loan file or retaining the original certificate in the branch vault for the term of the loan.
It is important to note that retaining the original certificate in the branch vault for the term of the loan may not be necessary in all cases, as it can be an expensive and cumbersome process. However, this decision should be made based on the bank's policies and risk management strategies.
Overall, the compliance officer's first priority should be to ensure that the bank is not taking in any questionable assets as collateral, and therefore, contacting the SIC to confirm the validity of the stock certificate is the appropriate first step in this scenario.