Key Takeaways: FINRA’s 2019 Report on Examination Findings and Observations

On October 16, 2019, FINRA published its 2019 Report on FINRA Examination Findings and Observations.  This report is a useful resource for firms to leverage to improve their compliance and risk management programs. 

One of the findings in the report pertains to failure to effectively monitor for and react to regulatory changes.  Firms are required to review regulatory changes against their supervisory systems, including their written supervisory procedures and training programs.  FINRA found that some firms did not adequately respond to recent regulatory changes such as FinCen’s new Customer Due Diligence (CDD) obligations and requirements around Financial Exploitation of Specified Adults among other recently adopted or amended rules. 

In addition, branch supervision and inspection programs were found to be inadequate at some firms. The following areas were specifically cited as supervisory and risk management gaps:

  • Failure to fully understand the activities that are taking place at branch offices, including the unique products and services offered at each branch location;
  • Failure to conduct periodic inspections of non-branch locations;
  • Failure to determine relevant areas of review, taking into consideration the nature and complexities of product and service offerings or indicators of irregularities or misconduct;
  • Failure to reduce the inspections and reviews to a written report;
  • Failure to follow through with necessary corrective action.

Suitability once again made the Sales Practice and Supervision hit list. Specific findings included:

  • Inadequate supervision of product exchanges;
  • Failure to identify and respond to red flags;
  • Inadequate oversight around customer account information changes;
  • Failure to recognize unsuitable transaction patterns;
  • Inadequate supervision of trading activities (excessive trading or churning);
  • Inadequate training of supervisors;
  • Unsuitable options strategies to unsophisticated customers.

Digital communications made it into this year’s report.  FINRA specifically noted some firms that prohibit for business-related communications the use of text messaging, social media and collaboration applications such as Facebook, did not maintain a process to identify and respond to red flags around the use of the prohibited digital channel communications.  Red flags could have been detected through adequate customer complaint management, email monitoring, outside business activity (OBA) reviews as well as advertising reviews.  Some effective practices to manage digital communication were flagged, including: 

  • Establishing comprehensive governance structures by leveraging marketing, compliance and technology departments as well as third-party vendors;
  • Defining and controlling permissible digital channels though supervision; records retention; policies and procedures; blocking prohibited channels; restricting use of messaging and collaboration applications that limit the firm’s ability to retain records;
  • WSPs to manage the lifecycle of video content which includes live-streamed public appearances, scripted commercials or video blogs;
  • Training prior to providing RRs access to firm-approved digital channels;
  • Disciplining misuse of digital communications such as temporarily suspending or blocking channels and requiring additional training.

FINRA also shares a number of cybersecurity-related observations and best practices in their 2019 report in hopes of assisting firms with strengthening their cybersecurity programs. The report reminds firms to evaluate each of the best practices and controls described in the report. Highlighted best practices include:

  • Maintaining branch-level written cybersecurity policies to protect confidential data;
  • Implementing procedures to verify that branch office controls were implemented and are functioning adequately;
  • Documenting formal policies and procedures on vendor and third-party management that include onboarding, ongoing monitoring, off-boarding and disposal of sensitive client information;
  • Establishing and regularly testing written formal incident response plans that outline procedures to follow when responding to cybersecurity and information security incidents;
  • Establishing data protection controls such as encryption of confidential data (customer and firm information) whether it is stored internally or at vendor locations;
  • Ensuring system patching is timely applied;
  • Applying a ‘Policy of Least Privilege’ around access controls, by only granting access to systems and data when required and removing such access rights when no longer needed;
  • Implementing multi-factor or two-factor authentication controls for RRs, employees, vendors and contractors accessing firm systems and data from outside the organization;
  • Maintaining an inventory of critical information technology assets, including hardware, software, data in home and branch offices; legacy assets that vendors no longer support as well as corresponding cybersecurity controls to protect these assets;
  • Implementation of data loss prevention controls to protect sensitive customer information such as SSN, dates of birth, bank information, driver’s license numbers;
  • Training for RRs, personnel, third-party providers and consultants;
  • Implementation of change management procedures to document, review, prioritize, test, approve, manage hardware and software changes.

Training staff on how to implement firm business continuity plans (BCPs) was cited as a BCP best practice in addition to engaging in annual testing of the BCP.  Note:  FINRA is currently conducting a retrospective review of FINRA Rule 3270 ~ Business Continuity Plans and Emergency Contact Information.  See FINRA Regulatory Notice 19-06

These are just some of the numerous highlights from the 2019 Report on FINRA Examination Findings and Observations to take into consideration when assessing the adequacy and effectiveness of your firm’s supervisory and risk management operations.

Note: RegEd is not engaged in rendering legal, accounting or other professional services. If legal or other professional advice is warranted, the services of an appropriate professional should be sought.

About the Author

Margie Webber is the Director, Regulatory Compliance BD/IA at RegEd, Inc.

Related RegEd Solutions:

RegEd Advertising Review

RegEd Audit Management

RegEd Complaint Management

RegEd Education & Training

RegEd Incident Management

RegEd Outside Business Activities

RegEd Policies & Procedures Management

RegEd Regulatory Change Management

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FINRA Annual Conference

RegEd to Showcase Enterprise Platform Solution at 2019 FINRA Annual Conference

Attendees will have the opportunity to learn how RegEd enables clients to efficiently meet compliance and registration obligations while presenting a unified enterprise view of requirements.

Raleigh, NC, May 10, 2019 (GLOBE NEWSWIRE) — RegEd, the leading provider of compliance technology solutions to broker-dealers and other financial services firms, is pleased to announce its participation at the 2019 FINRA Annual Conference in Washington, DC, May 15-17, 2019.

FINRA’s annual conference provides securities industry practitioners with guidance on regulatory priorities and addresses the compliance and regulatory issues investment advisers and broker-dealers face in today’s evolving industry with interactive forums led by experienced industry veterans and regulators. The conference will offer a variety of sessions related to current trends in technology, cybersecurity, risk management and much more.

During the conference RegEd will showcase its comprehensive platform capabilities and enterprise solutions, and discuss how it delivers the highest levels of efficiency, effectiveness and transparency across the enterprise, enabling firms to:

  • Consolidate vendors and applications to reduce complexity and overall cost of ownership.
  • Simplify the end-user experience to drive improved rep and user satisfaction.
  • Install enterprise-level reporting and dashboards for risk analysis to proactively identify negative trends, mitigate risk and demonstrate compliance.
  • Automate data entry, aggregation and reuse to reduce manual processes and human error.

RegEd representatives will be on-site to meet with conference attendees to understand their compliance challenges and discuss solutions that enable broker-dealers and other financial services firms to meet compliance requirements and proactively manage their compliance program.

The RegEd conference exhibit will be located at booth #13 in the conference’s main exhibitor hall at the Marriot Marquis Washington, DC. For more information on RegEd or its attendance at the FINRA Annual conference, please call 800-334-8322 or email sales@reged.com.

About RegEd

RegEd is the market-leading provider of RegTech enterprise solutions with relationships with more than 200 enterprise clients, including 80% of the top 25 financial services firms.

Established in 2000 by former regulators, the company is recognized for continuous regulatory technology innovation with solutions hallmarked by workflow-directed processes, data integration, regulatory intelligence, automated validations, business process automation and compliance dashboards. The aggregate drives the highest levels of operational efficiency and enables our clients to cost-effectively comply with regulations and continuously mitigate risk.

Trusted by the nation’s top financial services firms, RegEd’s proven, holistic approach to RegTech meets firms where they are on the compliance and risk management continuum, scaling as their needs evolve and amplifying the value proposition delivered to clients. For more information, please visit www.reged.com.

Madelyn Matthews
919-653-5202

Efficiencies with Advertising Review’s Two-Way FINRA Integration

Efficiencies with Advertising Review's Two-Way FINRA Integration

Firms filing their advertisements with FINRA know how time consuming and cumbersome the process can be. Not only does the firm need to review collateral based on internal processes, but they also need to organize and send firm-approved files to FINRA based on FINRA 2210. FINRA offers two ways to initiate the review process – either manually through their web portal, or by integrating with its Advertising Review Electronic Files (AREF) system.

Since AREF was introduced with RegEd’s Advertising Review solution in 2010, firms had the ability to automate the sending process. As of the spring 2018 release, firms can now take advantage of full automation with our two-way integration – send and receive FINRA results, and automatically WORM content (for firms that have RegEd WORM enabled on their workflows). The enhancement provides a holistic solution for end-to-end FINRA filing support. See the following three most exciting features included with Advertising Review’s AREF integration.

Two-Way Integration

Use the built-in AREF integration to send content to FINRA and receive notifications when the status and letter are returned. We’ve done away with waiting or having to manually check FINRA’s portal to see if a decision was made. Advertising Review’s AREF integration takes care of that for you. Not only does it automatically WORM the content (when enabled), it retrieves the status and letter when a decision is made, and notifies the applicable user(s) by email.

FINRA AREF 1

Effortlessly Manage Multiple Filings per Submission

What happens if a file is returned with a status other than ‘OK’ or ‘LIMITED’? How can you track the progress of updating the collateral and resubmitting to FINRA? That’s easy with Advertising Review’s history log. Directly in the submissions, users can view the snapshot of FINRA correspondence. Then with a few clicks, users can dive deeper to view individual filings, fee estimates, current status, and more.

FINRA AREF 2

Actionable & Accurate Reporting

Due to FINRA’s 2210 requirements, it is important that firms adhere to the rule to avoid being penalized. One way RegEd’s Advertising Review solution makes this easier is with the dedicated FINRA report. In addition to metadata directly related to FINRA filings, the export includes result details, status information (including applicable dates), fee amounts, as well as any Additional Documentation notes included with the submission. The report provides firms the power and flexibility to mitigate or eliminate gaps in their FINRA filing process.

FINRA AREF

Not using RegEd’s Advertising Review solution? Contact sales@reged.com or 888.334.8322 today!

Already using RegEd’s Advertising Review solution but not AREF? Contact your Relationship Manager today to learn how to add it to your subscription.

RegEd to Showcase Enterprise Platform Solution at 2018 FINRA Annual Conference

RegEd to Showcase Enterprise Platform Solution at 2018 FINRA Annual Conference

Attendees will have the opportunity to learn how RegEd enables clients to efficiently meet obligations across compliance management, conflicts of interest, education, and licensing and registration processes

RegEd, the leading provider of compliance technology solutions to broker-dealers and other financial services firms, is pleased to announce its participation at the 2018 FINRA Annual Conference in Washington, DC, May 21-23, 2018.

FINRA's annual conference provides securities industry practitioners with guidance on regulatory priorities and addresses the compliance and regulatory issues investment advisers and broker-dealers face in today's evolving industry with interactive forums led by experienced industry veterans and regulators. The conference will offer a variety of sessions related to current trends in technology, cybersecurity, risk management and much more.

RegEd's CEO & Founder, John M. Schobel, stated, "The FINRA Annual Conference provides an important forum for regulators, industry firms and solution providers, like RegEd, to engage in dialog about key trends and critical compliance challenges."

Mr. Schobel continued, "As the industry continues to shift toward technology consolidation and a streamlined rep and user experience, firms have increasingly turned to RegEd because of our unique ability to comprehensively address a wide breadth of compliance challenges with a single enterprise solution. We look forward to the opportunity to demonstrate the value that RegEd’s enterprise platform delivers.”

During the conference RegEd will showcase its comprehensive platform capabilities and enterprise solutions, and discuss how it delivers the highest levels of efficiency, effectiveness and transparency across the enterprise, enabling firms to:

  • Consolidate vendors and applications to reduce complexity and overall cost of ownership.
  • Simplify the end-user experience to drive improved rep and user satisfaction.
  • Install enterprise-level reporting and dashboards for risk analysis to proactively identify negative trends, mitigate risk and demonstrate compliance.
  • Automate data entry, aggregation and reuse to reduce manual processes and human error.

RegEd representatives will be on-site to meet with conference attendees to understand their compliance challenges and discuss solutions that enable broker-dealers and other financial services firms to meet compliance requirements and proactively manage their compliance program.

The RegEd conference exhibit will be located at booth #16 in the conference’s main exhibitor hall at the Marriot Marquis Washington, DC. For more information on RegEd or its attendance at the FINRA Annual conference, please call 800-334-8322 or email sales@reged.com.

About RegEd

RegEd is the market-leading provider of RegTech enterprise solutions with relationships with more than 400 enterprise clients, including 80% of the top 25 financial services firms. Established in 1994 by former regulators, the company is recognized for continuous regulatory technology innovation with solutions hallmarked by workflow-directed processes, data integration, regulatory intelligence, automated validations, business process automation and compliance dashboards. The aggregate drives the highest levels of operational efficiency and enables our clients to cost-effectively comply with regulations and continuously mitigate risk.

RegEd Announces Innovations in Branch Audit-Management Capabilities as Part of Enterprise Compliance-Platform

RegEd Announces Innovations in Branch Audit Management Capabilities as Part of Enterprise Compliance Platform

Increased automation, improved data management and simplified user experience streamline the end-to-end process of planning, conducting and resolving branch audits

RegEd, the leading provider of Compliance Management, Licensing and Registration, and Education solutions to the financial services industry, has announced the rollout of an upgraded version of its industry-leading Enterprise Branch Audit Management. The release is the result of significant investment and ongoing technology innovation to enable greater levels of automation and improved data accuracy in firms’ branch audit and inspections programs.

Branch Audit Management 4.0 incorporates more than three years of market input gained through continuous collaboration with more than 20 leading firms. Through this process RegEd identified growing needs among firms to consolidate multiple systems used to manage branch audits, to more efficiently and accurately manage audit data, and to effectively identify, mitigate and resolve audit deficiencies in a timely manner. In response RegEd has delivered the capability to view and manage audits from a single comprehensive system, introduced audit data pre-population capabilities to streamline data management, and enhanced its audit response system to enable firms to more efficiently close the loop on audits and deficiencies.

Increased automation and improved efficiency throughout the audit lifecycle have resulted in significantly streamlined audit management for RegEd’s clients. Adam Schaub, AVP & Chief Compliance Officer at 1st Global stated, “Our audit close-out letter goal is 30 days post inspection. After implementing RegEd’s Branch Audit Management solution, the first close-out letter was sent on the first day, and subsequent close-out letters also showed marked improvement in the inspection cycle.”

Branch Audit Management 4.0 also offers expanded offline audit capability, automatic identification of repeat deficiencies, simultaneous auditor access, an updated task dashboard, multi-level workflows and more. In addition to enabling firms to maintain compliance with regulations such as FINRA 3110 and 3120, Branch Audit Management greatly reduces manual tasks for individual auditors. For example, automated pre-population of data from other sources, such as client databases and questionnaires, materially reduces time spent manually referencing other systems, increasing audit capacity per auditor and improving data accuracy.

Enterprise Branch Audit Management is part of the RegEd enterprise compliance platform, which enables data sharing across modules and a clear view of the status of compliance obligations, including branch audits, at the company or individual level. Enterprise Branch Audit Management is now available for current and prospective users.  To request a demonstration or further information, visit www.reged.com

About RegEd

RegEd is a leading provider of compliance technology solutions with relationships with more than 400 enterprise clients, including 80% of the top 25 broker-dealers and top 25 insurance companies. Established in 1994 by former regulators, the company is a recognized industry authority and has created the standard of excellence for rule-based and content-driven compliance automation for insurance companies, investment advisors and broker-dealers.  RegEd solutions drive new levels of operational efficiency and enable firms to cost-effectively comply with regulations and mitigate risk.  For more information, visit www.reged.com

RegEd to Showcase Enterprise Compliance Solutions at FINRA Annual Conference

RegEd to Showcase Enterprise Compliance Solutions at FINRA Annual Conference

RegEd, the leading provider of compliance technology solutions to broker-dealers and other financial services firms, is pleased to announce its participation at the 2017 FINRA Annual Conference in Washington, DC, May 16-18, 2017.

FINRA's annual conference provides securities industry practitioners with guidance on regulatory priorities and addresses the compliance and regulatory issues investment advisers and broker-dealers face in today's evolving industry with interactive forums led by experienced industry veterans and regulators.

RegEd's CEO & Founder, John M. Schobel stated, "The FINRA Annual Conference provides an important forum for regulators, industry firms and solution providers, like RegEd, to engage in dialog about critical compliance and operational challenges and the best practice approaches for addressing those challenges." 

Mr. Schobel continued, "Conflicts of interest continues to be high on the radar of multiple regulators and we expect to see changes to FINRA’s Gifts, Gratuities and Non-Cash Compensation rules as a result of their proposed amendments. RegEd has invested significantly in addressing industry challenges in this area, and we will showcase RegEd’s enterprise-grade Gifts and Entertainment solution at the conference.”

During the conference RegEd will highlight a number of enterprise compliance solutions that enable firms to instill a culture of compliance in today’s rapidly evolving regulatory environment:

SCORE® Compliance Dashboard: Aggregates data to present a real-time view of compliance and credentialing status and requirements, at the enterprise or employee level.

Global Conflicts of Interest Management: Monitor, identify and remedy conflicts of interest and code of conduct issues across the firm’s supervised and employee populations.

Enterprise Gifts & Entertainment Management: Revolutionary advanced capabilities enable global enterprise gifts and entertainment tracking and management, including Concur® integration.

Registration and OBA: Streamline registration compliance across the enterprise, including end-to-end OBA tracking and reporting. Integrations automate filing and reconciliation of amendments and background 
investigations.

Regulatory Change / Policies & Procedures Management: Delivers actionable regulatory updates and tracking of compliance obligations in a closed-loop process. Impacted policies are automatically identified.

RegEd representatives will be on-site to meet with conference attendees to understand their compliance challenges and discuss solutions that enable broker-dealers and other financial services firms to meet compliance requirements and proactively manage their compliance program.

The RegEd conference exhibit will be located at booth #25 in the conference’s main exhibitor hall at the Marriot Marquis Washington, DC. For more information on RegEd or its attendance at the FINRA Annual conference, please call 800-334-8322 or email sales@reged.com.

About RegEd

RegEd, Inc. is a leading provider of compliance technology solutions with relationships with more than 400 enterprise clients, including 80% of the top 25 broker-dealers and top 25 insurance companies. Established in 1994 by former regulators, the company is a recognized industry authority and has created the standard of excellence for rule-based and content-driven compliance automation for insurance companies, investment advisors and broker-dealers.  RegEd solutions drive new levels of operational efficiency and enable firms to cost-effectively comply with regulations and mitigate risk. 

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