Despite recent regulatory upheavals, The Financial Industry Regulatory Authority (FINRA) ain’t dead yet. In fact, according to FINRA’s new president and CEO (since August 2016) Robert Cook, FINRA is very much alive and investigating!

In 2017, technology is making it possible for FINRA to be even more active. The Authority plans to initiate electronic, off-site reviews to supplement its traditional on-site cycle exams. This is expected to permit FINRA to review selected areas and make targeted information requests to firms which it will analyze off-site. Regulators will still be coming to visit, but they’ll also be reviewing your data remotely.

Out of sight is not out of mind

This year, bad apples will be smack in the regulatory crosshairs. Hiring high-risk and recidivist brokers? FINRA will be watching to see whether you are establishing appropriate supervisory and compliance controls for those with a history of acting badly.

In fact, they will be targeting three areas:

• Brokers FINRA believes may pose a high risk to investors, with an eye towards outside business activities, private securities transactions, commissions and fees;
• Your firm’s supervisory procedures for hiring or retaining “statutorily disqualified and recidivist brokers.” Plus, FINRA’s Membership Application Program will identify new and continuing member applications that employ or seek to employ registered reps with “problematic regulatory histories”; and
• Your branch office inspection programs and your supervisory systems for branch and non-branch office locations. These will include the supervision of account activity, advertising, and communications, including the potential use of unapproved email addresses for business; communications with customers, including via social media, seminars, radio shows, podcasts, etc.; your reps’ websites; and outside business activities.

Outside Business Activities

+ Social Media

+ Digital Communications

Do you know what your registered reps are up to? You better! This year, FINRA is focusing on your policies and procedures to review your reps’ written notifications of proposed outside business activities, including whether you’ve evaluated those activities for potential conflicts of interest.

FINRA will review firms’ compliance with their supervisory and record retention obligations with respect to social media and other electronic communications regardless of the medium or device used to communicate. So, you must capture and maintain all business-related communications in a manner that permits review for inappropriate business conduct.

Are you a compliant supervisor?

FINRA will be asking about and assessing your firm’s internal supervisory controls. The regulators will want to see regular testing as a tactic to identify and mitigate gaps or inadequate controls that could lead to significant, systemic control breakdowns. Control breakdowns can include, according to FINRA, record-retention omissions and failures to deliver requisite disclosure or other documents to clients.

Be prepared. But don’t overpay!

Noncompliance can be costly — we talk about fines and jail sentences on this blog all the time. But compliance doesn’t have to break the bank. Patrina is offering a 90-day, FREE trial of its comprehensive 8-module compliance solution. And that’s just the tip of our iceberg!

Let’s talk (212-233-1155). Ask about Patrina’s comprehensive compliance solutions and compliant data capture, file storage, and compliant records archiving specifically designed for the financial services community.

Let’s talk!