FINRA did not wait for any dust (or snow) to settle on the New Year before alerting the brokerage industry and the public about its regulatory and examination priorities for 2014. This year’s letter, issued earlier than ever before, mixes many time-honored themes, such as conflicts of interest, complex products, suitability, AML, private placements, and algorithmic and high frequency trading, with significant new topical issues, including qualified plan rollovers, crowdfunding and recidivist brokers. Taken as a whole, the letter is an invaluable resource for broker-dealers, providing what FINRA Chairman and CEO Rick Ketchum describes as “a road map of issues that may be of risk to the investing public.”
We summarize below some of the significant issues raised in the letter, along with our recommendations about how to prepare for a risk-based FINRA examination of these issues.
As with many FINRA initiatives, we anticipate that its 2014 examinations will focus as much on the quality of a broker-dealer’s supervisory systems and procedures as on any underlying violations or customer harm. Indeed, Executive Vice President for Regulatory Operations, Susan Axelrod, who oversees the exam program, stated, “We encourage firms to use this guidance along with their own analysis to enhance their programs as we will be examining for strong controls and robust compliance efforts in these areas.”
To learn more, read our full client alert.