Cybersecurity Exam Observations and Effective Practices

Cybersecurity Exam Observations and Effective Practices

Cybersecurity remains one of the principal operational risks facing broker-dealers and Registered Investment Advisers. Accordingly, FINRA and the SEC’s examiners expect firms to have reasonably designed cybersecurity programs and controls consistent with the firm business model and scale of operations to ensure that sensitive data, including client information, is not lost or misused, or accessed by unauthorized users.

Examiners continue to inquire into the Firm’s controls regarding firewalls, vulnerability, penetration testing, and training during office examinations.

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regulatory exam

Regulatory Exam Preparedness and COVID-19

Your firm is beginning to get in the groove since the shelter-in-place orders have been implemented. In the past, you have worked from home on certain days, but the transition to full-time teleworking, homeschooling, and pet sitting has been a challenging reality. Then surprise! You get a call from your regulatory coordinator that FINRA or the SEC has decided to conduct a regulatory exam of your firm starting now.

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Digital Communication

Digital Communications: 2019 FINRA Report

In the recent “2019 Report on FINRA Examination Findings and Observations,” one of the topics highlighted was the use of digital communications. This can include a wide range of social media, email, text messaging, and various other digital tools. The regulatory requirements pertaining to the usage of digital communications are outlined in Exchange Act Rule 17a-3 and 17a-4 and FINRA Rules 3110(b)(4) and 4510. These rules require procedures pertaining to the usage of these types of communications, as well as the appropriate maintenance of the communications in the form of books and records.

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Investment Advisor Representative Registration

Form U10 and TESS (Test Enrollment Services System)

Since our last post about Form U10, FINRA has implemented the Test Enrollment Services System (TESS). Beginning in June 2017, FINRA began transitioning all non-U4 examination enrollments to TESS and ended the utilization of the Form U10.

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FINRA’s 2017 Examination Findings

Recently, the Financial Industry Regulatory Authority (“FINRA”) released its 2018 Regulatory and Examination Priorities Letter.   The letter details the topics that FINRA will focus on during the 2018 calendar year.  Firms should review the letter and use it as a guide in making their compliance programs more robust and audit ready for the next examination cycle.  Here, we will discuss a few of the topics that FINRA highlighted. Read More…