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.