Each year, FINRA releases its "Annual Regulatory and Examination Priorities Letter." Compliance thought leaders and industry publications rush to comment and discuss.
On January 8, FINRA released its 2018 letter. The following is a quick-guide to what is new for 2018 and what professionals had to say.
1 ) An article from ThinkAdvisor published on Monday summarized this year's priorities into three categories.
“FINRA’s areas of priority in 2018 include:
- sales practice risks, including recommendations of complex products to unsophisticated, vulnerable investors;
- protection of customer assets and the accuracy of firms' financial data; and
- market integrity, including best execution, manipulation across markets and products, and fixed income data integrity.”
2) Many of the priorities for 2018 are the same as past years.
Areas of focus from past years include fraud prevention, supervision practices, best execution, cybersecurity, anti-money laundering, customer protection, suitability and more.
3) Some topical issues made the 2018 list. Among them were Cryptocurrencies and ICOs.
“FINRA will closely monitor developments Initial Coin Offerings and Cryptocurrencies, including the role firms and registered representatives may play in effecting transactions in such assets and ICOs,” the letter states.
4) Recent natural disasters like Hurricane Harvey and Hurricane Maria have renewed FINRA's focus on business continuity plans (BCPs).
5) FINRA warns brokers about moving clients from brokerage to advisory accounts and suggests increased scrutiny of such moves.
An article from Investment News, draws attention to this new area of focus and quotes Brian Rubin. Rubin is a Partner at Eversheds Sutherland and heads his firm’s Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA) and state securities enforcement practice. He told Investment News that this may be FINRA sending a message to dually-registered firms to “keep an eye on both their advisory and brokerage accounts.”
For more from Brian Rubin on FINRA enforcement and trends, watch a recorded 2017 MCO Webinar here.
6) This letter should act as a checklist for firms enhancing their programs and preparing for potential FINRA examinations.
The founder and President of Cipperman Compliance Services and occasional co-host of MCO Webinars, Todd Cipperman told Investment News that FINRA’s focus on hiring and supervisory practices of brokerages that employ brokers with checkered disciplinary histories is part of an overall "theme of supervision" in the letter. Cipperman discusses this in more detail on his blog here where he advises member firms to use the priorities letter as a checklist when preparing for FINRA exams in 2018.
Additional Resources:
The priorities letter cites the FINRA's 2017 Examination Findings Report for supporting details around specific rules.
You can read the full FINRA letter here: 2018 Regulatory and Examination Priorities Letter
