What FINRA regulators have seen this year
For the edification of the financial community, the Financial Industry Regulatory Authority (FINRA) has published a summary of key findings drawn from its 2018 broker-dealer examination, surveillance and risk monitoring programs. Historically, a broker-dealer’s FINRA examination report addressing issues identified are provided only to the relevant firm. However, the Authority hopes that in issuing this report it may serve as another resource for firms to strengthen their compliance programs and supervisory controls and possibly preempt regulatory exposure.
While many of the issues highlighted impact investor suitability checks, worth noting is a marketing-related issue – DBAs and client communications.
DBAs and outside business activities
There are no FINRA rules regarding registered reps using a “doing business as” or DBA name. However, FINRA does have an issue when some use their DBAs to conceal outside business activities that were not disclosed as required by FINRA Rule 3270 – Outside Business Activities of Registered Persons. FINRA has also notes that some firms have additional deficiencies relating to FINRA Rule 2210 – Communications with the Public – in their oversight of members’ doing business with a DBA. FINRA reports that those firms using an independent contractor business model faced additional challenges because their reps and branches are relatively autonomous. In particular, FINRA saw firm failing to maintain adequate written supervisory procedures (WSPs)and controls, or disclosures regarding DBA name use
Among the issues FINRA identified were:
More FINRA updates to come
FINRA expects further summaries of exam observations will be forthcoming, as the regulatory and compliance climate evolves. And it expects that these reports also will help the financial services community improve and preemptively strengthen internal oversight and compliance even before the regulators come knocking.
That’s where Patrina comes in. We’ve built our business based on helping organizations stay on the “straight and narrow” efficiently and cost-effectively. So, let’s talk. Call 212-233-1155 to ask about Patrina’s cost-effective and comprehensive, 8-module compliance solution, and compliant data capture, file storage, records archiving, and designated third-party services specifically designed for the financial services community. Be smart. Be covered.