In today’s ever-evolving broker dealer environment, a Financial and Operations Principal (“FINOP”) plays a vital role in ensuring the compliance and financial integrity of the broker dealer(s) that he/she is registered with. Due to constant changes within the regulatory landscape, FINOPs encounter numerous compliance challenges that demand their attention and expertise, and as a result, a FINOP must have the knowledge and experience to suggest strategies to the broker dealer to help effectively address these challenges.

Below are a few common compliance challenges that FINOPs face along with strategies to help address them:

Regulatory Complexity: Broker dealers operate in a highly regulated environment governed by federal and state securities laws, as well as industry self-regulatory organizations such as the Financial Industry Regulatory Authority (“FINRA”) and the Securities and Exchange Commission (“SEC”). Because this framework is so intricate and complex, FINOPs face the constant challenge to stay abreast of constant changes and ensuring compliance. Adhering to the Net Capital Rule (“SEC Rule 15c3-1”) and the Financial Reporting Rule (“Rule 17a-5”) requires meticulous attention to detail and understanding of complex financial regulations. It is imperative that FINOPs prioritize ongoing education and training to stay updated on regulatory developments in an effort to continuously enhance their understanding of complex financial regulations.

Anti-Money Laundering (“AML”) Compliance: Broker dealers are obligated to implement robust AML compliance programs in order to detect and prevent money laundering activities. FINOPs needs to ensure the effectiveness of AML controls that in place so that they can make the necessary filings such as the suspicious activity reports (“SARs”). When adequate AML procedures are not in place, other licensed staff, such as the FINOP, are affected. Collaboration between FINOPs, compliance officers, legal counsel, and other stakeholders is essential for navigating regulatory challenges and implementing strong compliance programs and procedures.

Technology Integration: Rapid advancements in technology are transforming the broker dealer industry. A FINOP must be adaptable to new software platforms and systems for financial reporting and compliance monitoring. Ensuring these new platforms and systems are secure and compliant can provide a significant challenge for FINOPs. Being able to leverage advanced technological solutions for financial reporting, compliance monitoring, and cybersecurity can ultimately streamline operations and enhance the compliance efforts for the broker dealer.

As shown above, FINOPs face a myriad of compliance challenges in today’s broker dealer environment. Upholding the financial integrity of their broker dealers can be accomplished by being proactive and fostering a culture of compliance as well as leveraging technology. If you would like to speak to Securities Compliance Management regarding FINOP services, please contact us here. SCM provides best-in-class FINOP and accounting services that can take your broker dealer to the next level.