Ben Franklin once said “by failing to prepare, you prepare to fail.” Based on the SEC’s latest risk alert concerning broker-dealers’ anti-money laundering (AML) compliance (or lack thereof), some firms would be well served to heed Mr. Franklin’s advice.
The SEC specifically seeks to examine broker-dealers’ compliance with the various regulations and laws governing firms’ AML obligations. The risk alert highlights the SEC’s observations relating to firms’ deficiencies concerning (a) AML policies and procedures and internal controls; and (b) suspicious activity reporting (SAR). The SEC’s emphasis on AML should come as no surprise, as the SEC has previously included it as an exam priority. FINRA has additionally provided broker dealers with extensive AML guidance.
Continue reading “Risky Business: SEC Risk Alert Highlights Broker-Dealers’ Anti-Money Laundering Miscues and Encourages Firms to Beef Up Protection”
Last week, FINRA issued its 2018 “Report on FINRA Examination Findings.” This report tracks FINRA’s 2018 Priorities letter, which this blog has previously covered. Putting its member firms on notice, FINRA advised that it issued the report as another resource for firms to “strengthen their compliance programs and supervisory controls.” Not surprisingly, the first highlighted observation is “Suitability for Retail Customers.” Specifically, FINRA reported that:
Continue reading “A Summary of FINRA’s 2018 Report on Examination Findings”
The SEC’s Office of Compliance Inspections and Examinations (OCIE) released its 2018 National Exam Program Examination Priorities on February 7, 2018 (“2018 Priorities Letter”). While issued later than in years past and almost a month to the day after the publication of the priorities letter from the Financial Industry Regulatory Authority (FINRA), OCIE deserves credit for the increased transparency and guidance provided in the 2018 Priorities Letter. By way of perspective, OCIE’s sixth publication of its examination priorities more than doubled the amount of information provided in last year’s edition. This improved transparency is consistent with the public statements of OCIE’s Director. Despite the greater detail, there appears to be one glaring omission: OCIE does not discuss how the anticipated rulemaking by the Commission regarding the development of a fiduciary standard may impact its priorities. However, upon further consideration and recalling that OCIE’s primary mission is to conduct examinations to assess compliance with the current securities laws, we realize it would have been premature for OCIE to discuss views on some yet-to-be formulated SEC fiduciary standard. That said, OCIE is clearly prioritizing the protection of retail investors even more than in years past, which is consistent with the SEC Chairman’s public statements about prioritizing the protection of “Main Street” investors. While the SEC Chairman has made these issues a “Main” priority, the SEC’s heightened focus regarding retail and retirement investors has been strengthening significantly since the Retirement-Targeted Industry Reviews and Examinations (ReTIRE) Initiative announced a few years ago and through the SEC’s announcement this past autumn of the Retail Strategy Task Force. Thus, OCIE leads into the 2018 Priorities Letter in the second and third sentences by opening with: “…we will continue to prioritize our commitment to protect retail investors, including seniors and those saving for retirement. We will especially be looking closely at products and services offered to retail investors, as well as the disclosures they receive about those investments.” This focus is similar to the focuses emphasized by FINRA in its recent priorities letter. Continue reading “SEC’s 2018 Exam Priorities – Worth the Wait”
FINRA released its 2018 Annual Regulatory and Examination Priorities Letter (Priorities Letter) on January 8, 2018. While FINRA advises that it can change its priorities in response to circumstances, the purpose of the Priorities Letter is to permit broker-dealers to plan their compliance, supervisory and risk management programs and to prepare for FINRA examinations. Therefore, this Priorities Letter is significant both in what it says and in what it has chosen not to say including failing to discuss FINRA’s views regarding a “fiduciary standard.”
Continue reading “FINRA 2018 Annual Regulatory and Examination Priorities Letter Makes No Mention of a Fiduciary Duty for Brokers”
As part of the Financial Industry Regulatory Authority’s (FINRA) efforts to protect investors, FINRA regularly conducts examinations of its broker-dealer members. Despite requests to release the reports to assist other FINRA members in improving their compliance with securities rules and regulations, FINRA has traditionally kept the reports private. That all changed this month.
On December 6, FINRA released a Summary Report of several observations from recent examinations. FINRA selected key issues based on their “potential impact on investors and markets or the frequency with which they occur.” The Summary Report will help FINRA members address potential areas of concern and improve their compliance and supervisory programs prior to their own examinations.
The Summary Report provides observations in 11 exam areas, and the notable ones include:
Continue reading “FINRA’S First Ever Public Release of Exam Findings: Top 6 Observations for Improving Compliance”