FINRA Issues Exam Priorities Letter
FINRA has released its 10th annual Regulatory and Examinations Priorities Letter, highlighting its 2015 regulatory focus. FINRA will highly scrutinize certain product offerings including interest rate sensitive fixed income securities (long duration bonds, MBS, interest-only bond funds), variable annuities, liquid alts, and non-traded REITS. The FINRA examiners will focus on implementation of the revised supervision rules including reviews of branch offices and OSJs and compliance testing. FINRA will analyze IRA rollovers, sales of private placements and suitability, failure to offer required fund breakpoint discounts, and anti-money laundering procedures. Firms should also shore up their valuation procedures to ensure adequate net capital, their cybersecurity programs, and their order routing and best execution practices.
OUR TAKE: If a compliance officer reads only two documents this year, he/she should closely review this FINRA priorities letter as well as the SEC’s priorities list, which we expect soon. Both FINRA and the SEC are fairly transparent about what they will examine, and they generally follow through in examinations and enforcement actions.