The 2021 Report on FINRA’s Examination and Risk Monitoring Program is designed to provide broker-dealers with important information that highlights the regulator’s priorities and annual insights regarding the scope and content of their upcoming examinations.
The Report also identifies key areas each broker-dealer should consider as they assess the effectiveness of their firm’s compliance program. At the top of the list are Regulation Best Interest (Reg BI) and Form CRS. Taking into account the June 30, 2020 implementation date, last year’s examinations assessed whether firms had made a good faith effort to implement policies and procedures that are reasonably designed to comply with Reg BI. In 2021, FINRA made it clear they will expand the scope of their “Reg BI and Form CRS reviews and testing to effect a more comprehensive review of firm processes, practices and conduct.”
Given the breadth of Reg BI, Form CRS and each of the obligations within the Rule, it can be difficult for broker-dealers to know how prepared they will be for their next review. While FINRA did not publish exam findings or effective practices around Reg BI in this Report, they highlighted several Additional Resources.
It is important to remember that the requirements of Reg BI are a continuing obligation. Your Reg BI responsibilities did not end on June 30, 2020 and your business is not frozen in time. The Compliance Obligation applies on an ongoing basis. Broker-dealers must establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with Reg BI. This means broker-dealers must have procedures to regularly review and update, as necessary, their Reg BI program and disclosures. Each broker-dealer’s business may require different disclosures that are dependent upon their specific revenue streams, conflicts, and products. Ongoing review and identification of sources of revenue and conflicts of interest are at the core of Reg BI.
Oyster Consulting’s industry practitioners have the real-world compliance expertise to support your efforts to enhance your firm’s Reg BI policies and procedures. We are well-positioned to complete a thorough, independent assessment of your firm’s Reg BI program and can provide you with a report that includes our recommendations and best practices to comply with Reg BI’s requirements.