WASHINGTON – FINRA published its 2019 Report on FINRA Examination Findings and Observations. The report reflects key findings and observations identified in recent examinations, and contains effective practices that could help firms improve their compliance and risk management programs. It summarizes findings and observations across a range of topics, including supervision, cybersecurity, best execution, segregation of client assets, and Uniform Transfers to Minors Act (UTMA) and Uniform Grants to Minors Act (UGMA) accounts.
This year’s report includes two material changes to increase its utility. One, it aims to more clearly delineate between material that is an examination finding, which describes a violation of a rule or regulation, and material that is an examination observation. The latter refers to a suggestion around how firms can improve controls to address perceived weaknesses that elevate risk, but does not typically rise to the level of a rule violation or cannot be tied to a specific rule. And two, this year’s report includes a new “Additional Resources” sub-section for most topics, with links to relevant additional information such as Regulatory Notices, topic pages and FAQs.
“Our position as a self-regulatory organization affords us the unique opportunity to provide firms with resources that help them more easily comply with rules and regulations and protect investors—and this report aims to do just that,” said FINRA Executive Vice President of Member Supervision Bari Havlik. “We hope firms find the Exam Findings and Observations Report useful in strengthening their own control environments and addressing potential deficiencies before their next exam.”
FINRA’s examination, surveillance, and risk monitoring programs play a central role in supporting FINRA’s mission of investor protection and market integrity, and a main component of those programs is FINRA’s examinations of broker-dealer firms. In addition to the individual reports firms receive following FINRA exams, firms have requested to learn more about what FINRA is seeing through its examination programs more broadly. In response – and as a result of FINRA360 – FINRA first published the Report on Examination Findings in December 2017.
The 2019 Report on FINRA Examination Findings adds to the collection of guidance FINRA has made available to firms on a variety of issues, and joins FINRA’s report cards as another resource firms can use to gauge their compliance controls against the rest of the industry’s. In addition, FINRA publishes an annual Risk Monitoring and Examination Priorities Letter to highlight issues of importance to FINRA’s regulatory programs.
FINRA is a not-for-profit organization dedicated to investor protection and market integrity. It regulates one critical part of the securities industry—brokerage firms doing business with the public in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org.