FINRA recently released its 2019 FINRA Risk Monitoring and Examination Priorities Letter which describes areas that brokerage firms should consider as they identify opportunities to improve their compliance, supervisory and risk management programs. Risk monitoring is the ongoing process through which FINRA monitors developments at firms and across the securities industry to identify risks and assess their prevalence and impact. As for examinations, FINRA examines firms and associated persons for compliance with securities laws, regulations and rules, and, where appropriate, also exercises its regulatory powers to investigate, initiate enforcement action and impose sanctions.
Brokerage firms should expect that FINRA will review for compliance a firm’s obligations related to suitability determinations, including with respect to recommendations relating to complex products, mutual fund and variable annuities share classes, as well as recommendations to use margin or execute trades in a margin account; outside business activities and private securities transactions; private placements; communications with the public; anti-money laundering; best execution; fraud (including microcap fraud); insider trading and market manipulation; net capital and customer protection; trade and order reporting; data quality and governance; recordkeeping, risk management and supervision related to these areas. FINRA will also focus on risks related to associated persons with a problematic regulatory history, including how firms address such risks in their hiring practices and supervision programs.
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