FINRA is planning on turning up the heat on perceived “high-risk” brokers this year, and the firms that hire them. Continuing our discussion regarding FINRA’s 2015 Regulatory and Examinations Priorities Letter, this blog entry will discuss FINRA’s planned activities to prevent and/or stop registered representatives from engaging in actual misconduct.
In an effort to protect the investing public from potential fraud, FINRA is planning to take extra steps this year to identify and remove “unscrupulous registered representatives who prey on investors”. To achieve this, FINRA promises to expand its use of data mining, analytics, and specially targeted examinations, in addition to increasing their use of expedited investigations and enforcement actions.
FINRA is also focused on firms that seek to hire high-risk brokers, including “statutorily disqualified and recidivist brokers”. FINRA plans to review firms’ due diligence on prospective brokers during the hiring process. FINRA also is focused on firms’ supervision of high-risk brokers, including whether the firm implements and follows a stated supervisory plan.
Firms should expect increased scrutiny this year as FINRA tries harder than ever to identify high-risk brokers and prevent misconduct. Per FINRA’s suggestions, firms should consider updating and/or creating (if one does not already exist) a plan regarding the hiring and supervision of potentially high-risk brokers, so as to meet FINRA’s expectations during an examination.