FINRA opened 2015 with a lengthy and ambitious agenda of regulatory priorities. This year’s Regulatory and Examination Priorities Letter is much longer than those issued the last two years, and repeats many of those years’ priorities, while adding additional products and practices. Amidst this smorgasbord of priorities, several are highlighted in FINRA’s accompanying press release, and so might have a favored place at the table:
- sale and supervision of interest-rate-sensitive and complex products, including alternative mutual funds;
- controls around the handling of wealth events in investors’ lives;
- management of cybersecurity risks;
- treatment of senior investors; and
- high-risk brokers and removing bad actors from the securities industry.
In the letter, FINRA seeks to unify its priorities around a set of systemic issues that it believes differentiate good firms from non-compliant firms: putting customer interests first; firm culture; supervision, risk management and controls; product and service offerings; and conflicts of interest. FINRA will use data analytics to identify potential problem areas within firms, and expects firms to use similar methods to identify problems themselves.
We summarize below some of the more significant issues raised in the letter, along with our recommendations about how to prepare for a risk-based FINRA examination of these issues. As always, the best way for a broker-dealer to prepare for a FINRA examination and avoid enforcement interest is for the firm to put itself in the head of a FINRA examiner and address the areas that FINRA is likely to examine in light of the firm’s business, history and supervisory structure.
To read the full alert, click here.