FINRA PROVIDES EXAM PRIORITIES AND COMMON DEFICIENCIES

FINRA published “Improving Examination Results” which outlines examination priorities and frequently found deficiencies. Examination priorities include activities with respect to senior investors (e.g. suitability, marketing), deferred variable annuities (e.g. training, suitability), AML (e.g. filings SARs), protection of customer information (e.g. mobile devices), supervision (especially in areas of frequent customer complaints), sales of non-conventional products (e.g. hedge funds, CMOs/CDOs, REITs, auction rate securities, structured products), transaction reporting, business continuity planning, cash sweep programs, and outsourcing. Among frequently found deficiencies include supervisory controls especially under Rule 3012, independent AML testing, protecting customer information especially when outsourcing, net capital errors and miscalculations especially after large data conversions, and transaction reporting.

OUR TAKE: FINRA rarely surprises with its regulatory initiatives. Firms should use this publication as a guide for its conducting its next compliance review.

http://www.finra.org/RulesRegulation/ComplianceTools/ImprovingExamResults/p038526