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FINRA Highlights Practice Shortfalls and Better Practices

FINRA has published a report of insights drawn from recent examinations that the agency considers worth highlighting “due to their potential impact on investors and markets or the frequency with which they occur.”

The report also describes certain practices that FINRA says it has observed to be effective in appropriate circumstances, “which other firms may be able to use as a resource in tailoring their compliance and supervisory programs to their business.” However, FINRA cautions that there “should be no inference” that the agency requires firms to implement any specific practices described in this report that extend beyond the requirements of existing securities rules and regulations.

Moreover, FINRA cautions that the 14-page report does “not represent a complete inventory of observations about the industry as a whole, does not imply that any issues discussed exist at any particular firms, and should not be read as creating new legal or regulatory requirements or new interpretations of existing requirements.” Indeed, it notes that an individual firm “may not have any deficiencies in the risk areas identified in the report.”

That acknowledged, FINRA goes on to note that the report also describes certain practices that it has “observed to be effective in appropriate circumstances, which other firms may be able to use as a resource in tailoring their compliance and supervisory programs to their business.” Once again, however, it cautions against an inference that FINRA requires firms to implement any specific practices described in this report that extend beyond the requirements of existing securities rules and regulations.

The report’s highlighted observations are in the areas of:


  • Cybersecurity

  • Outside Business Activities and Private Securities Transactions

  • Anti-Money Laundering Compliance Program

  • Product Suitability

  • Best Execution

  • Market Access Controls


It also offers additional observations in the following areas:

  • Alternative Investments Held in Individual Retirement Accounts (IRAs)

  • Net Capital and Credit Risk Assessments

  • Order Capacity

  • Regulation SHO

  • TRACE Reporting

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