On Wednesday the Financial Industry Regulatory Authority (FINRA) released its annual examinations letter. We at MCO have summarized our top three takeaways.
1) High-Risk Brokers will be scrutinized.
The regulator will review the hiring and supervisory practices of those firms who employ brokers with a record of disciplinary actions against them. The letter claims FINRA believes that these individuals may pose a higher risk to investors.
2) Protecting senior investors will be a priority.
FINRA will devote more attention to protecting the interests of senior investors, especially around suitability and the purchase of potentially higher yielding speculative or complex products.
3) Don't underestimate suitability.
The process that firms use to review the suitability of recommendations for customers and how these suggestions are monitored will be under scrutiny of FINRA in 2017.
The excessive short-term trading of long-terms products is another area of suitability that FINRA plans to pay close attention to in 2017.
Watch out for
Other areas of priority for FINRA in 2017 include monitoring of outside business activities, monitoring and record retention of social media and cybersecurity.
“A common thread running throughout the Priorities Letter is a focus on core ‘blocking and tackling’ issues of compliance, supervision and risk management,” Robert W. Cook, Finra president and chief executive wrote in the cover letter.
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