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FINRA 2021 Exam Priorities

United Atlantic Legal Services welcomes FinProLaw as it’s guest blog author. Today, FinProLaw will cover FINRA’s 2021 Examination Priorities.

In February, the Financial Industry Regulatory Authority (“FINRA”) published its 2021 Report on FINRA’s Examination and Risk Monitoring Program (the “Report”) which: (1) identifies the applicable rule and key related considerations for member firm compliance programs; (2) summarizes noteworthy findings from recent examinations and outlines effective practices that FINRA observed during its oversight; and (3) provides additional resources that may be helpful to member firms. A link to the Report can be found at the end of this blog.

The Report begins with a general discussion of COVID-19 and then narrows its focus into four separate topics: firm operations, communications and sales, market integrity, and financial management. While all broker-dealer Chief Compliance Officers will want to review the Report in detail, this blog focuses on how a Chief Compliance Officer can leverage the weight of a regulatory publication to move internal compliance initiatives forward.

As we elaborate in the New Chief Compliance Officer Bootcamp course, it is important to be aware of what the regulators are considering and publications, such as FINRA’s Examination and Risk Monitoring Program, provide great insight into what is being considered a priority or high risk to regulators. While it is almost always inappropriate to send the entire Report to the firm with a “see attached” note; there are other ways that a Chief Compliance Officer can leverage the Report.

First, use the Report to highlight why your firm has certain policies and procedures in place. We recommend that Chief Compliance Officers pick a compliance topic of discussion on a routine (i.e. monthly) basis to do a “deep-dive” on with the firm. For example, March may be the month that Outside Business Activities are covered. Provide your firm with the rule, the associated policies and procedures and then emphasis the importance of compliance with examples and statements from regulators, such as those made in the Report. 

Here is an example of one way Chief Compliance Officers can address topics:

“FINRA Rule 3270 (Outside Business Activities of Registered Persons) requires registered representatives to notify our firm in writing of proposed outside business activities (OBAs) so the firm can determine whether to limit or allow those activities. For instance, the firm may need to limit the scope of an OBA where there is a potential conflict of interest with clients. The firm has established written policies and procedures, to which you all have attested receiving and understanding, to address Rule 3270 requirements. We have provided a copy of those policies and procedures to this email, please let me know if there are any questions of concerns. 

Everyone should be aware that FINRA has taken noted, in its 2021 Priorities Report (attached) deficiencies around OBAs.  Compliance with these rules is imperative and regulators will make a review of our firm’s compliance around OBAs a priority. Please help our firm stay in compliance.” 

Second, using regulatory publications, such as the Report, during your firm’s annual compliance training is a great way to bring in yet another “voice of authority” to hammer in compliance concerns. Especially where a firm has had missteps in a given area of compliance it is often useful to reiterate regulatory oversight. “They really are out there, they really are watching.”

Finally, use regulatory publications, like the Report, to test your compliance program. Review all of the areas of concern and get them into a risk analysis for your firm. You may wish to go so far as to do testing specifically around the areas of regulatory priority. It ensures compliance and makes for a great memo/presentation to the board of directors and/or other members of leadership at your firm.

Link to 2021 Report on FINRA’s Examination and Risk Monitoring Program: 

About the Author

Michael Rasmussen is the founder of United Atlantic Legal Services. He is a licensed attorney in Florida and registered solicitor in the United Kingdom. Michael has acted as General Counsel and Chief Compliance Officer to several investment advisers, including private fund managers, responsible for the management of billions of dollars in client assets.  

Michael is also the founder of FinProLaw, an online learning platform where Michael has created courses designed for investment adviser compliance professionals. These courses include: 

  • Investment Adviser Compliance Essential for Chief Compliance Officers 
  • Foundations of Investment Adviser Compliance 
  • What is a “Security”? 
  • Investment Adviser Marketing Rule 
  • Regulation A – Exemption from Registration 
  • Regulation Crowdfunding – Exemption from Registration 
  • Regulation D – Exemption from Registration 

Michael can also be found on LinkedIn.

Investment adviser firms who are also clients of United Atlantic Legal Services can receive many of these courses at a significantly reduced fee or, in some cases, at no expense. Contact us today or visit the FinProLaw to learn more.