A CLEARER FINRA 2019 Exam Findings and Observations

At the request of member firms (according to FINRA), FINRA  has now released its 2019 Reports on Examination Findings summarizing key findings from member exams. Different from earlier reports (2017 and 2018), this time around, FINRA says it wanted to make clearer the distinction between exam findings (violations of SEC, FINRA rules) and observations (suggestions for improving control environment).

FINRA’s stated goals are to identify issues and advise members of effective practices that can address deficient compliance programs in areas covering sales practice and supervision, firm operations, market integrity, and financial management. While the list contains many of the usual deficiencies, it also includes specific and noteworthy observations about how to strengthen compliance in these areas, including

supervision and document requirements

Suitability Rule violations

Digital Communication Use

Anti-Money Laundering (AML)

Uniform Transfers and Grants to Minors Accounts

Cybersecurity

Business Continuity Plans

Fixed Income Mark-up Disclosure

Best Execution

Direct Market Access Controls

Short sales

Liquidity and Credit Risk Management

Segregation of Client Assets

Net Capital Calculations

A link to the report can be found here.

Author: Dexter Johnson

The author is a an attorney who for the past 14 years has concentrated his practice in representing, successfully, investment advisers, broker-dealers, corporations and individuals who are subject to SEC, FINRA, State or other regulations and who may be the subject of regulatory examination, review or investigation. He formerly worked at the SEC. His regulatory and litigation experience has encompassed virtually every type of securities issue in the industry. He has also negotiated favorable outcomes in many of these matters for his clients.