Whether it’s your first exam or 31st, FINRA knows its examiners make you nervous. They admit as much in their “What to Expect” and “How-to Prepare” documents on FINRA’s website.Wh
ether it’s your first exam or 31st, FINRA knows its examiners make you nervous. They admit as much in their “What to Expect” and “How-to Prepare” documents on FINRA’s websiteThey know you worry: “Why my firm, and why now?”
You’re not alone. FINRA conducts between 1,500 and 2,000 risk-based cycle examinations each year to assess identified risks and controls to determine whether firms are in compliance with federal securities laws, rules, and regulations.
Whether you know it or not, FINRA typically peeks at your firm’s business activities annually. In determining whether your examination cycle is yearly, every other year, every three years or ever four years, it looks at the risks associated with your business activities and any factors that may influence or otherwise impact FINRA’s assessment of risk. And while your exam cycle may vary year to year, one thing is certain: FINRA will examine you at least once every four years.
Whenever your number does come up, FINRA’s examination team builds a risk-based execution strategy. They focus on risk areas material to your business and areas deemed regulatory priorities. Your exam also may include compliance reviews for MSRB and the various other exchanges for which FINRA conducts regulatory work.
The Exam Process
Up to 60 days before FINRA’s toes cross your threshold, you’ll be notified of your upcoming exam, and receive a high-level overview regarding exam logistics; the risk areas being considered for review, if known; and indicate when you should receive the first document request.
Before they come on-site, FINRA staff review and analyze your firm’s information. They want to better understand your business to pinpoint material risks and priority areas of focus. Through its Request Manager application, FINRA also may ask for documents via the FINRA Firm Gateway. The upside? This communications conduit creates an audit trail of requests and productions for both parties.
By the time FINRA’s examiners arrive, their exam strategy already is in place. Expect more specific and granular requests for information around their prioritized areas of review. And, be prepared to meet them yourself, introduce them to management, and give ’em a tour of your operations.
So when your number does come up…will you be ready to show them your stuff? How will you access the records you need and those FINRA requests, and deliver it all to the examiners in a timely fashion? Will you wade through mountains of paper in off-site file cabinets? Or, review hundreds and thousands of scanned archives on your screen? Or, will you launch a pre-emptive strike, connecting with an independent regulatory archival and compliance solutions specialist? Like us? Patrina. Ask about our comprehensive regulatory archival and compliance solutions specifically designed for Broker/Dealers, RIAs, and FCMs. Or…you could wait for that FINRA call…
Let’s talk (212- 233-1155).