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FINRA Issues Examinations Findings Report

FINRA has issued a report summarizing its observations on the compliance and supervision issues arising from recent examinations.  Highlighted concerns include cybersecurity, outside business activities, anti-money laundering, product suitability, best execution, and alternatives in IRA accounts.  FINRA found weaknesses in cybersecurity programs including failure to control access to data, insufficient risk assessments, and inadequate vendor supervision.  FINRA expressed concerns about failures to report OBAs and failures to execute adequate reviews or retain documentation.  AML programs fell behind as firms changed and grew but failed to properly resource growing AML volume.  FINRA raised suitability concerns over recommendations of UITs, fund share classes, and complex products.  FINRA hopes that firms will use the report as a “resource in tailoring their compliance and supervisory programs to their business.”

OUR TAKE:  It’s always good to get more transparency into the examination program.   What’s less clear is how firms should react to this information especially since FINRA generally issues its examination priorities letter in January.  Regardless, expect FINRA to focus on these issues during cycle exams.

http://www.finra.org/sites/default/files/2017-Report-FINRA-Examination-Findings.pdf

SEC Chairman Re-Commits to Examinations and Enforcement

In recent testimony about the SEC’s proposed 2018 budget, Chairman Jay Clayton emphasized enforcement and examination activities.  Mr. Clayton noted that 50% of requested budget resources will go to enforcement and examinations.  He said that the SEC is on track to deliver a 20% increase in adviser examinations and plans a further 5% increase.  He noted that the staff will put a special focus on cybersecurity efforts.  Mr. Clayton also committed to continue the SEC’s “vigorous enforcement efforts to investigate and bring civil charges” including critical areas such as “investment professional misconduct.”

OUR TAKE:  It appears that the Clayton SEC will continue the examinations and enforcement focus of the Mary Jo White SEC.  The more things change, the more they stay the same.

https://www.sec.gov/news/testimony/testimony-fiscal-year-2018-budget-request