On Jan. 10, 2023, the Financial Industry Regulatory Authority (FINRA) published its 2023 on Exam and Risk Monitoring Program, in which the regulatory body commented on topics such as cybersecurity, Regulation Best Interest and anti-money laundering.
“This report represents a holistic approach to FINRA regulation, leveraging information from across our regulatory operations to provide member firms with information to help them enhance their core compliance programs,” said Greg Ruppert, Executive Vice President, Member Supervision at FINRA. “The report addresses topics that remain perennially important, with updates to reflect evolving risks, industry trends and findings from FINRA’s recent oversight activities. This year, we have also increased the breadth of the report’s coverage by adding several new topics focused on insights originating in our market surveillance activities.”
Topics covered in the FINRA Exam Report for 2023
Within the report, FINRA highlighted 24 topics of note, four of which were new this year. The new topics, as stated by FINRA in the Exam press release were:
- Manipulative Trading. The report’s findings include inadequate written supervisory procedures, non-specific surveillance thresholds and surveillance deficiencies.
- Fixed Income – Fair Pricing. Among the findings are incorrect determination of prevailing market price, outdated mark-up/mark-down grids, failure to consider the impact of mark-up on yield to maturity and unreasonable supervision.
- Fractional Shares. Reporting failures and inadequate supervisory systems and procedures are among the findings.
- Regulation SHO. This section includes findings on non-bona fide market making and impermissible reuse of locates.
Topics which have been featured in previous years include:
- Trusted contact persons.
- Variable annuities.
- Private placements.
- Best execution.
- Liquidity risk management.
FINRA highlighted in the introduction to their exam that each topic area included:
- Identification of the relevant rule(s).
- Key considerations for member firms’ compliance programs.
- Noteworthy findings or observations from recent oversight activities.
- Effective practices which FINRA observed through its oversight activities.
- Additional resources which may be helpful to member firms in reviewing their supervisory procedures and controls, and fulfilling their compliance obligations.
The full exam report is available for regulated firms to read on the FINRA website.