Examination and Risk Monitoring: What to Expect in 2020

FINRA recently released a podcast called “What to Expect: The 2020 Exam and Risk Monitoring Program“. It provides a wealth of information from three members of the Member Supervision Senior Leadership on what to expect from the Examination and Risk Monitoring program in 2020. Here are a few highlights from the podcast.

Five Buckets of Examination and Risk Monitoring

Beginning in January 2020, Firms will be placed in one of 5 buckets, and the examinations and teams will be focused on those groupings. Furthermore, the Firms will be further divided into sub-groups as well. Ultimately, the goal is to tailor and focus on specific risks.

  1. Retail
  2. Capital Markets
  3. Diversified
  4. Carry and Clearing
  5. Trading and Execution

Small Firm vs. Large Firm Examinations

All Firms must comply with FINRA rules; however, FINRA is now trying to take the scope and size of the Firms into account when reviewing and requesting the following:

  1. Operational
  2. Financial
  3. Product
  4. Sales Conduct

Single Framework for Unified Exam Program

The goal is to have a unified single exam program. The Firm will have one contact with a unified view. The cycle frequency will not change, but a single holistic risk rating will be taken as in prior years where multiple rankings were scored per area.

Regulation Best Interest

Before June 2020, FINRA examiners may discuss a Firm’s preparation for the implementation of Regulation Best Interest. After June 2020, FINRA will look at how reasonable the Firm took steps to create policy, procedures, and other items to meet the new requirements.

Please contact our office to learn more about our expert consulting in this area.  To learn more about other important compliance topics, check out our other Broker/Dealer posts

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