In October 2019, the Financial Industry Regulatory Authority (FINRA) released its “2019 Report on FINRA Examination Findings and Observations.” FINRA publishes a report yearly to highlight its examination “findings” (i.e., findings of violations committed by member firms) detected throughout the year. In addition to findings, the 2019 Report advances further than years past and consists of “observations.” Observations (formerly known as recommendations) are suggestions to a member firm on how to improve its control environment to address weaknesses that do not typically rise to the level of a violation or cannot be tied to an existing rule.
Although the 2019 Report repeats many of the findings highlighted in previous years with respect to important topics such as suitability, anti-money laundering, segregation of assets, and best execution, the 2019 Report introduces new findings and expands upon findings made in previous reports. FINRA hopes that the 2019 Report, like previous reports, can assist member firms navigating common pitfalls such as fixed income mark-up disclosures, direct market access controls, liquidity management, and net capital calculations. FINRA’s new/expanded key findings involve hot topics such as supervision, digital communication, know-your-customer rules, cybersecurity, and business continuity plans. This GT Alert highlights certain of the new findings and observations within the 2019 Report.