SEC and FINRA broker-dealer exam priorities for 2019: how to prepare

Abstract

PurposeThe purpose of this paper is to summarize and analyze the 2019 broker-dealer examination priorities of the Financial Industry Regulatory Authority (“FINRA”) and the US Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”).Design/methodology/approachThis paper provides an overview of the FINRA and OCIE examination priorities for the year, details particular aspects of both regulators’ priorities that may be of interest to broker-dealers and provides practical tips to prepare for a regulatory exam.FindingsIn 2019, OCIE intends to prioritize retail investors, compliance and risk in registrants responsible for critical market infrastructure, digital assets, cybersecurity and anti-money laundering programs. FINRA will focus on a number of materially new areas of attention, as well as on sales practice, operational, market and financial risks.Practical implicationsBroker-dealer firms should review their policies and procedures in the areas highlighted by FINRA and OCIE, both to ensure that the procedures are consistent with existing regulatory requirements and to assure that firm personnel are actually complying with those policies and procedures. In situations where the firm’s practices have changed over time, firms should amend their policies and procedures to comport with current practices.Originality/valueThis paper provides an overview of the notable aspects of both regulators’ examination priorities that are particularly relevant to broker-dealers and recommends ways that firms can prepare for examinations on those issues.