Having issued a new suitability rule and explicated it for the industry, on September 25, 2013, the Financial Industry Regulatory Authority (FINRA) took the next step and issued Regulatory Notice 13-31 (“Notice”), providing practical advice to member firms about how it will be examining for compliance with the rule, some findings about failures to comply and a set of best practices for compliance.  The good news is that FINRA’s examinations have found that firms for the most part have adopted policies, procedures and systems to address the requirements of the suitability rule.  Moreover, firms have been very responsive to FINRA’s feedback resulting from exams by addressing deficiencies.

The Notice and the practices highlighted therein are envisioned by FINRA to be “positive steps in building a strong compliance environment.”  FINRA encourages firms to carefully consider the practices discussed in the Notice in the near term to determine whether additional efforts are required to improve the suitability determination and supervision process, rather than wait for a regulatory examination that finds their practices to be wanting.

Read our client alert which summarizes FINRA’s findings and best practices.

View Original Source
Daniel Nathan

Mr. Nathan is a partner in the firm’s Securities Litigation, Enforcement and White-Collar Defense Group. Mr. Nathan’s practice includes representation of companies and individuals who are involved as witnesses or subjects in investigations conducted by the SEC, the CFTC, FINRA and other regulatory entities involving financial institutions or transactions. Mr. Nathan also consults with financial institutions on examinations, supervisory procedures, product disclosure and supervision, and other regulatory matters.