FINRA noted in its exam priorities that it will be focusing on firms’ compliance with the new supervision rules (FINRA Rules 3110, 3120, 3150 and 3170). These rules became effective on December 1, 2014.
Now that two months have passed since their effective date, firms should have taken the changes into account in their written supervisory procedures and in practice. These new rules modified existing requirements regarding the following:
- Supervising offices of supervisory jurisdiction and inspecting non-branch offices.
- Managing conflicts of interest through the supervisory system.
- Risk-based review of correspondence and internal communications.
- Risk-based review of investments banking and securities transactions.
- Monitoring for insider trading, conducting internal investigations, and reporting the results to FINRA.
- Testing and verifying supervisory control systems.
By highlighting these changes in its 2015 exam priorities, FINRA has teed these issues up for member firms. Indeed, FINRA has made it known that it will be looking at how firms have implemented the change to the rules on supervision.
Before your next examination, ask whether your firm has taken these changes into account. If not, the best course of action is to develop and implement a supervisory system that takes these changes into mistake. Otherwise, you will likely face issues at the conclusion of your exam.
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