New Podcast: FINOP Exam Priorities and COVID 19 Impacts on FINOP Procedures

The FINOP is specifically responsible for financial filings and books and records related to those filings.  Each year FINRA produces its Exam Priorities, indicating which areas of compliance on which it will focus. While FINOP work isn’t always a hot topic, there are a few areas mentioned that could affect FINOPs.   In our April 8, 2020 episode of Oyster Stew, Oyster’s Rob Hall, Jeff Harpel and Clark Tucker discuss the exam priorities as they relate to FINOPs. Also, in light of the COVID 19 virus pandemic, what firm business continuity plans should take into account, from the FINOP perspective.

If your firm is struggling with FINOP responsibilities, Oyster Consulting has retained some of the best talent in the industry. Our consultants have experience assisting our clients with a long-term solution, filling a short-term need, or training a newly-registered FINOP. Oyster can support the day-to-day operations across your firm, allowing you to spend valuable time investing and communicating with clients.  When working with Oyster, you aren’t just working with one consultant, you are working with the entire team, with access to the combined knowledge and skills of our associates.


Speaker 1: 0:05

Welcome to this week, serving an oyster stew, a mix of financial services, commentary and insights each week. We’ll discuss what is happening in the industry based on what we see as we work with regulators and clients, we hope you come away with the knowledge and tools to help you make the best decisions for your firm’s future.

Speaker 2: 0:23

Hi everyone. I’m Rob hall. I’m the CFO of oyster consulting and the host of today’s podcast. Today. I’m here with oysters, financial consultants, Jeff Harpal and Carl Tucker . And we’ll talk a bit about FINRA’s exam priorities. As far as spinoffs are concerned and in light of the COVID-19 virus, what firms should be considering around the business continuity plans and fin op work , Jeff and Clark both have extensive experiences outsourced spin-offs as well as having held CFO and fin positions in the securities industry prior to working for Easter. So Jeff, earlier this year, FINRA produced their annual exam priorities letter, and there were a couple of items specifically around fin op work. Can you talk a little bit about them,

Speaker 3: 1:11

The basics they are still going to cover for all of us and are still going to make sure you’re complying with the net capital rule. Your books and records are up to date, what your call allowable and not is all accurate. You know, we’re not working as spinoffs . We’re never going to get out of those things. You’re going to like always look at those. Don’t forget that, you know, it’s like, you know, they’re , they’re going to come in the door and they’re going to say, let’s say your trial balance and your balance sheet and your net capital calculation for this month end. And all those things are gonna happen just like they always do, because they always look at that. And in addition to that, well then we have, okay. They might focus a little bit more heavily on the thanks suite program, if you’re a clearing firm and how you do that, or if you actually do, underwritings how you make sure you have your commitments and how you’re getting the information as a fin up to get the right commitment charge. But the basics are always going to be covered. So be ready no matter what. So we know that, you know , fender is going to come in and do an exam, and they’re going to look at all the normal things they’re going to check at Capitol are going to check your adherence to reserve requirement. If that happens to apply to you. And then this year, they have a couple of specific areas they want to highlight and focus on. Um, one of which is cash management and bank suite programs. Now for many of our firms, they might not do that. But if you are a clearing firm or maybe even an introducing firm who is involved in this program through, through a clearing firm, you know, this might be important to you. Uh , a lot of the issues they’re highlighting relate to how you disclose and sell and get people to sign up for the program, which isn’t really fin up. But there are a couple of points that kind of do roll into the fin op world. And that is that they’re going to check to make sure that affirm is performing reconciliations of customer balances held at each destination bank. I mean, that’s important because if there are reconciling differences, they could have an impact on your three , three calculation and your reserve calculation in that you might have credits you have to include in the formula, or if you have unfavorable differences, you might have capital charges. So, you know, be, be aware that their focus might be how it’s being sold and marketed, but there’s still impacts to the fin op area. And also going to look at banks , sweep programs and how the money actually moves to the either bank or money market fund as the case may be because it’s still a , your credit in your reserve formula until it gets there. And you have to be careful of how the money is in transit and how do you have it recorded. So those things matter to the bank suite programs. They’re also, you’re going to look at contractual commitments arising from underwritings . And again, a lot of our clients don’t do that, but many others do. So it’s important from a fin perspective. Again, they’re there . A lot of their focus is marketing and sales. What I would call sales practices, but still fin ops , getting infected , um, finance needs to know what the commitments are. They have to be able to get the documentation, have the documentation of whether it’s a firm commitment or best efforts and best efforts. You’re not going to have a firm commitment, capital charge, a firm commitment underwriting. You will and have to know what that underwriting is, what the product is, what that commitment charge will be. And we all know that, you know, you have a hundred percent of whatever that is for at least the moment you sign the deal. So there’s a lot of information you need to make sure you get and make sure you document. And as we’ve said, in other blogs, it’s not documented, it didn’t happen, you know, be aware of those things and check your procedures, make sure they’re up to date. And you’ve got everything documented, signed, sealed, and delivered.

Speaker 2: 5:26

Okay. Thanks Jeff. So in light of what’s going on these days with the COVID-19 virus, let’s take some time now to talk about the firm’s business continuity plans and how they can affect ethanol .

Speaker 3: 5:39

You know, we’ve always known that that capital’s a moment to moment calculation, and you’ve always had to be able to do that no matter the circumstances. And you’ve always had to have contingency plans, business continuity plans. So if this goes down, you know, you’ve got another way to do it. And I don’t know that this is going to be that different unless it gets really, really bad. I mean, my , my expectation is with it while they expect to have a business continuity plan, they expect you to be able to work from home if you have to. So be ready to do that. A firm has to be able to maintain their books and records during any kind of interruption. So if you normally go into the office to pay bills, let’s say, how would you do that? If you can’t go to the office, you know, can you receive your invoices electronically? Like oyster sends out invoices via email so they can be approved electronically through some sort of workflow process and still be paid. Um, you know, will that still happen? And you can still be a viable company if nobody can go into the office. So, you know , those kinds of things have to happen. And then it’s not just getting people paid or invoices paid, but how has all that accumulated how it all the other general lunches get into people have access to accounting systems remotely? Is there a workflow remotely that will allow for approval of transactions and then the compilation of all the data? So you can create reports, you know, can all that happen. If people can’t go into the office, you know, normal business continuity for a finance kind of area, it just happens to be a virus. It could have been anything else. You know, they’re pretty routine thoughts. You ha you have to have a month

Speaker 2: 7:35

And that’s a basic, a business continuity plan is. Yeah. But, but if you drill down just to fin up , uh , work, you want to need to make sure you’re you have access to the finances, or somebody has access to the finances that , uh , can run reports and , and send, send to the fin. Op and as Jeff touched on , uh , the fin op is responsible for the books and records. So , uh, keeping the books and records , uh up-to-date and secure, then , uh , that’s all part

Speaker 3: 8:03

Of it. This is sort of an unscheduled test of people’s business continuity plan . Well ,

Speaker 2: 8:09

Our process then the upside is, is that our process is basically remote. Anyway, our general daily processes is remote, except for the few times that you feel like you need to go and get to the office. So we are working a remote process every day of the year as an outsource funnel , as opposed to a fit out that actually works. There is physically located there

Speaker 3: 8:35

As an outsourced spinoff . We already have figured out how to do things remotely. And most of the firms we work with, I figured out how to do things remotely. So it’s, you know, those are already in place.

Speaker 4: 8:47

The type of broker dealer help help also helps to determine this and the urgency behind it, because for example, a retail firm or client money and client securities , and client trading and client best interests and client protection are critical. Uh , that’s going to have a higher priority and smaller limited purpose firms, you know, there’s lower volume of business. So the, the minute to minute sense of urgency is not, you know , on anywhere near the same level. Um, you know, a farm that does M and a advisory, for example, they might not close, you know, merger and acquisition, but three times a year. And so the rest of the time, it’s just, you know, basic accountant . But, you know, I mean, the sense of urgency is very different. It’s when it’s, when we involve retail clients or trading firms where it’s , where seconds matter or, or the , the, you know, the intraday , um, different matters , uh, you know, is great example. They issue commercial paper twice a year. And so all of that is kind of outside and not really that impactful on a , on a minute to minute basis, but, you know, we can know what their financials are because they’re not changing rapidly. Um, some of these other firms that have larger staff within the broker dealer , um, and retail business, it that’s where I think it, it takes a higher priority. And you would hope that those firms do have the business recovery plans in place that allows them to at least get the basic stuff.

Speaker 2: 10:34

Okay. That was all great information that I’m sure people in the industry are going to appreciate. So thanks for sharing your experiences. And also thanks to everybody for listening. If you have any questions about what we’ve discussed or other funnel questions, or if you have a topic you’d like us to discuss in the future, feel free to call us at (804) 965-5400 or visit our website at www dot oyster,

About The Authors

Clark Tucker is a senior financial and operations executive with more than 25 years of experience in the banking and securities industries. He serves as FinOp for Introducing and Advisory broker-dealers.

Jeff Harpel is a seasoned industry professional with over 30 years of expertise in accounting, finance, and auditing in the securities brokerage industry. Jeff’s experience includes a comprehensive understanding of securities operations and regulations, experience in dealing with regulatory bodies, examiners and auditors and a thorough command of internal controls, financial systems, and merger conversion activities.

Robert Hall is the Chief Financial Officer of Oyster Consulting, LLC and has been in the financial services industry for 25 years.  In addition, Rob serves Oyster’s clients as a FINOP and performs family office supervision, where he serves on various Boards and acts as Trustee.


Whether you are looking to change from self-clearing to fully-disclosed (or vice-versa), exploring your clearing options or starting a broker-dealer, Oyster can assist with the assessment, analysis, vendor selection and conversion processes.