This blog is part of a continuing series on regulatory and compliance issues discussed at FINRA’s 2023 Annual Conference. A panel discussion on industry development and regulatory trends that have been identified through FINRA’s Examination, Risk Monitoring and National Cause and Financial Detection (NCFC) groups offers insights into how and where FINRA examiners will be focused.
How FINRA’s Examination Groups Collaborate
Firms are now grouped by business model rather than region to develop more expertise in particular business model groupings by FINRA examiners and analysts.
The Risk Monitoring group works with Examinations to develop exam schedules and determine exam frequency which is based on the Risk Monitoring team’s assessed risk and the firm’s impact on the industry. According to the panel, Risk Management works with firms throughout the year, and then shares information with Examinations. Together, the teams develop a targeted exam based on the risks of that particular firm. After examinations are completed, the Examination team brings back information to Risk Monitoring to add to the firm’s risk assessment. The same process takes place when the National Cause and Financial Crimes group (NCFC) begins an investigation. Risk Monitoring works closely with Exams, NCFC, Members Applications (MAP) and the Complex Intelligence and Investigations teams.
Common Issues
Common issues found among Member Firms include, not surprisingly, off-channel communications, issues and risks associated with recent regional bank failures, the implementation of Reg BI (Regulation Best Interest), and the challenges associated with remote exams and inspections. The panel did say that they are conducting more onsite examinations this year, based on the risk associated with the firm or branch being examined.
Trends
Some regulatory trends the panel identified include ACATs fraud (the fraudulent transfer of customer accounts using the automated ACATS system), a lack of preparation for succession planning and supervisory system errors due to coding or other errors resulting in missed red flags. FINRA panelists recommended that firms test their supervisory and compliance systems for these types of problems. The panel also touched on areas that have been identified in FINRA’s Report on Examinations and Risk Monitoring including Variable Annuities and Private Placements.
Stay tuned for more blogs in this series. Oyster experts stay current with regulatory and compliance issues and are ready to help you navigate the challenges that your firm faces. Our consultants have regulatory and compliance experience to effectively conduct 3120 Reviews, Branch Exams, AML Testing, as well as help with creating or testing succession plans.
