Exam priorities for financial services firms in 2018

The Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) recently released their annual examination priorities for 2018.  Although the regulators independently develop their areas of focus, there are five overlapping priorities that securities firms may want to address in the near term.

The SEC’s priorities are organized around five thematic areas: (1) compliance and risks in critical market infrastructure; (2) matters of importance to retail investors, including seniors and those saving for retirement; (3) FINRA and the Municipal Securities Rulemaking Board (MSRB); (4) cybersecurity; and (5) anti-money laundering (AML) programs.

FINRA’s priorities fall into six main categories: (1) fraud, (2) high-risk and firms and brokers, (3) operational and financial risks, (4) sales practice risks, (5) market integrity, and (6) new rules.

Our detailed review reveals five priorities shared by the SEC and FINRA:

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529 Plans – Where we are today

The Financial Industry Regulatory Authority (“FINRA”) and the Securities Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”) have highlighted concerns around the sale of 529 College Savings Plans (“529 Plans”).1 The concerns they have expressed revolve primarily around 529 Plans share class recommendations and the conflicts of interest that may exist with such recommendations. These concerns remain relevant, and may receive additional scrutiny given the current focus of multiple regulators on fees, conflicts of interest and fiduciary behavior. Continue reading “529 Plans – Where we are today”

Exam priorities for securities firms in 2017

The Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) recently released their annual examination priorities for 2017.  Although the regulators independently develop their areas of focus, there are six overlapping priorities that securities firms may want to address in the near term.

The SEC’s priorities are organized around three thematic areas (two of which, the first and third, were included in 2015 and 2016):  (1) protecting retail investors; (2) focusing on risks specific to elderly and retiring investors; and (3) analyzing issues related to market-wide risks.

FINRA’s high-level focus will be on:  (1) high-risk and recidivist brokers; (2) sales practices; (3) financial risks, including liquidity risk and compliance with recently effective amendments to Rule 4210 (Margin Requirements); (4) operational risks, including cybersecurity; and (5) market integrity.

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SEC publishes CAT National Market System Plan for public comment

Columns

On April 27, 2016, the Securities and Exchange Commission (SEC) unanimously approved a proposal to implement the Consolidated Audit Trail (CAT) National Market System (NMS) plan for public comment. This milestone reflects a multi-year commitment by the US national securities exchanges and the Financial Industry Regulatory Authority (FINRA) (collectively, the self-regulatory organizations, or SROs). The SROs, with the support of Deloitte, have developed this NMS plan to govern the creation and operation of the CAT Central Repository, which will contain information about all transactions conducted within the US equities and options markets.

The CAT will require market participants to capture, retain, and report granular trade detail at the beneficial owner level across multiple asset classes and the trade order life cycle.
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Exam Priorities for Securities Firms in 2016

The Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) recently released their annual examination priorities for 2016. Although the regulators independently develop their areas of focus, there are seven overlapping priorities that securities firms may want to address in the near term.

The SEC’s priorities are organized around the same three thematic areas as the 2015 priorities: (1) protecting retail investors, especially investors saving for retirement; (2) analyzing issues related to market-wide risks; and (3) using data analytics to identify registrants that may be engaged in illegal activities.

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Key takeaways: 2015 National Compliance Outreach Program for Broker-Dealers

2015 National Compliance Outreach Program for Broker-Dealers

Posted by Marjorie Forestal, Mike Jamroz and Vishal Kumar on August 31, 2015.

On July 14, 2015, the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) hosted the National Compliance Outreach Program in Washington, D.C., to help compliance, audit, and risk officers of broker-dealers better understand how they can improve their firms’ compliance with laws and regulations. Speakers and panelists included SEC and FINRA leaders and compliance executives from leading firms. Below are some of the key takeaways:

Accountability of firm senior executives and compliance officers
Panelists emphasized that C-level executives and the board should commit to their firm’s compliance frameworks, including creation of procedures for dealing with conflicts of interest and proper escalation to senior management to help deter potential actions for violations of policy, laws, or regulations. The panelists noted that while the SEC does not intend to target compliance professionals, there will be an increased focus on the duties of compliance professionals and Chief Compliance Officers (CCOs).

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Exam priorities for securities firms in 2015

FINRA and SEC

The SEC and FINRA recently announced their examination priorities for 2015. Although each regulatory body has its own distinct focus areas, there are seven common priorities that securities firms may want to put at the top of their to-do lists.

Broadly speaking, the SEC will be focusing on three high level areas: protecting retail investors; assessing market-wide risks; and using data analytics. FINRA’s high level focus will be on addressing recurring challenges within its member firms, including: putting customer interests first, firm culture, supervision, risk management and controls, product and service complexity, and management of conflicts of interest.

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