On January 4, 2017, the Financial Industry Regulatory Authority (“FINRA”) released its annual regulatory and exam priorities letter for 2017 (the “Letter”). In the Letter, FINRA outlined the areas in which its examiners will pay particular attention with respect to its inspections this year.
In a cover letter to the Letter, FINRA President and CEO Robert Cook noted the “common thread” running through this year’s letter was a focus on “core ‘blocking and tackling’ issues of compliance, supervision and risk management.” He also noted that in response to comments from FINRA members, FINRA will introduce two new tools to assist FINRA members with their compliance obligations: (i) a summary report of its key examination findings in certain areas and deficiencies found in those examinations and (ii) a “compliance calendar” and a directory of compliance service providers. In the Letter itself, Mr. Cook stated that FINRA will be initiating electronic offsite reviews to enhance its on-site examinations.
FINRA firms, in particular compliance staff, supervisors and senior business leaders, should utilize the information contained in the Letter as part of their own internal compliance, supervision and risk management practices.
Below is the complete list of issues FINRA will focus on in 2017; all of these are discussed in detail in the Letter:
High risk and recidivist brokers
*Product Suitability and Concentration
*Excessive and Short-Term Trading of Long-Term Products
*Outside Business Activities and Private Securities Transactions
*Social Media and Electronic Communications Retention and Supervision
*Financial Risk Management
*Credit Risk Policies, Procedures and Risk Limit determinations Under FINRA Rule 4210
*Supervisory Controls Testing
*Customer Protection/Segregation of Client Assets
*Regulation SHO – Close Out and Easy to Borrow
*Anti-Money Laundering and Suspicious Activity Monitoring
*Municipal Advisor Registration
*Audit Trail Reporting Early Remediation Initiative and Expansion
*Tick Size Pilot
*Market Access Rule
*Fixed Income Securities Surveillance Program
FINRA plans to periodically provide insights into the issues discussed in this Letter, and reminded readers of all the other resources FINRA regularly provides to FINRA firms and the public through its website, conferences and regulatory issuances.