On November 2, 2016, several representatives from the SEC and FINRA spoke at SIFMA’s C&L New York Regional Seminar, including from the SEC, Stephanie Avakian, Deputy Director, Division of Enforcement, and from FINRA, Susan Axelrod, Executive Vice President, Regulatory Operations, and Susan Schroeder, Senior Vice President, Enforcement. At a general session on enforcement during the seminar, Ms. Schroeder highlighted three areas, among others, that FINRA would focus on in 2017: (1) AML (particularly with respect to microcap companies); (2) senior citizens (particularly with respect to POAs and trusted contact persons); and (3) cybersecurity. At the same general session on enforcement, Ms. Avakian highlighted the following five areas, among others, that the SEC would focus on in 2017: (1) the use of data analytics to analyze complex products and embedded derivatives (emphasizing that firm representatives must understand the risks of complex products and explain them to customers and adequate disclosure must be provided); (2) insider trading; (3) conflicts of interest with respect to investment advisors; (4) accounting issues; and (5) cybersecurity, including cyber-related disclosure failures and information theft for purposes of gaining a competitive advantage (emphasizing the need to control access and protect information).
In addition, during the seminar’s keynote address, Ms. Axelrod mentioned that FINRA’s 2017 exam priorities will focus on, among other things, (1) the hiring of problematic brokers (emphasizing that firms should re-examine the supervision of their brokers and adopt best practices) and (2) appropriate discounts/breakpoints (emphasizing that firms should take action and make corrections on their own as the identification of an issue is not by itself sufficient).
Ms. Axelrod stated that FINRA expects to release its 2017 exam priorities letter in January 2017, and we will continue to monitor FINRA statements on exam priorities on our BD/IA Regulator blog.