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FINRA Exam Priorities

Tuesday, January 15, 2013

It’s that time of year again and FINRA has published its Exam Priorities Letter which highlights areas of significant focus in their audit program. These priorities represent FINRA’s assessment of the key issues they will focus on in 2013. The areas highlighted in their letter include:

Under Business Conduct and Sales Practices

  • Suitability and Complex Products (FINRA Rule 2111)
  • Business Development Companies (BDCs)
  • Leveraged Loan Products
  • Commercial Mortgage Backed Securities (MBS)
  • High-Yield Debt Instruments
  • Structured Products
  • Exchange Traded Funds and Notes (ETFs and ETNs – particularly those using leverage)
  • Non-Traded REITs
  • Closed-End Funds
  • Municipal Securities
  • Variable Annuities
  • Cyber-Security and Data Integrity
  • Microcap Fraud
  • Private Placement Securities
  • Anti-Money Laundering
  • Automated Investment Advice
  • Branch Office Supervision

Insider Trading

Firms must be vigilant in safeguarding material, non-public information, and should periodically assess information barriers and risk controls to ensure they are adequate. FINRA provides some examples of risk controls that firms should assess to make sure their insider trading controls are adequate.

Financial and Operational Priorities

  • Guarantees and Contingencies
  • Margin Lending Practices
  • Leverage and Liquidity

Market Regulation Priorities

  • Algorithmic trading
  • High Frequency Trading Abuses
  • Alternative Trading Systems (ATS)
  • Options Origin Codes
  • Large Options Position Reporting (LOPR)
  • Fixed-income (including best execution)

For more complete information on the key issues outlined above, please read the entire letter by clicking here.

As always, if you need any help with your compliance program or have any questions, please contact us. Our team at Red Oak is always here to help guide you through the regulatory quagmire.

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