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Common Exam Findings

Monday, July 31, 2017

To educate Firms on common exam problems examiners are “seeing consistently,” John Hickey, deputy director of FINRA’s New York district office, recently identified a few of the most common findings from examiners reports.

Outside Business Activities

Firms have become better at collecting Outside Business Activities. However, Firms are not performing a deep dive into the data in their possession and/or performing periodic reviews to determining if the data is still accurate.

Branch Inspections

Firms are not performing regular periodic inspections of their compliance programs. If an inspection is performed, it is likely the inspection was not comprehensive enough to discover potential gaps in their compliance program.

Anti-money laundering

Examiners noted that firms are not performing all necessary steps for a comprehensive AML program. Some of the common deficiencies encountered are frequency of surveillance reviews as well as following up timely on alerts that may be received.


For firms that outsource their compliance services, examiners have found numerous occasions where the firm did not have procedures to accurately review the vendor. If procedures were in place, the procedures were not always followed.

In addition, ensuring procedures are followed, it is important to verify the data intended to be stored at the third-party has been received by the third-party and has been captured as intended.

Excessive Trading and Churning

When a Firm conducts a review of trading activity, often the review is not comprehensive or follow the policies and procedures listed out in the Firm’s Compliance manual.

The items listed above are just a few of the common exam findings that have been noted by examiners. Compliance officers should periodically review their compliance program to ensure it is comprehensive. Red Oak can help firms by performing their annual 3120 review or by performing an overall gap analysis.

About Red Oak Compliance Solutions

Red Oak Compliance Solutions is the global advertising review software of choice in the financial services industry. It is a comprehensive suite of SEC 17A-4 compliant features that are 100% books and records compliant and provides clients with 35% faster approvals and 70% fewer touches or better. We also offer Smart Review(SM), which solves for the storage and maintenance of disclosures, helping firms reduce risk, decrease review times, and increase the speed of distribution of marketing materials. Smart Registration(SM) automates the licensing and registration management process to help reduce regulatory risk and time spent on manual processes. Overall, Red Oak allows firms to minimize risk, reduce costs, and increase compliance review process effectiveness and efficiencies.