FINRA’s Top Exam Violations Report Released
FINRA has released its 2023 Examination and Risk Monitoring Program Report, highlighting key compliance issues identified during recent oversight activities. The report aims to provide member firms with insights to strengthen their compliance programs and protect investors.FINRA+8KPMG+8Carlton Fields+8Goodwin Law+5FINRA+5FINRA+5
🔍 Key Compliance Findings
The 2023 report addresses 24 topics across various areas, including financial crimes, firm operations, communications and sales, market integrity, and financial management. Notable findings include:Goodwin Law+3KPMG+3FINRA+3
- Regulation Best Interest (Reg BI) and Form CRS: Firms were found to have inadequate written supervisory procedures, insufficient training, and failures in identifying and disclosing conflicts of interest. Data Matters Privacy Blog+6FINRA+6comply.com+6
- Cybersecurity and Technology Governance: FINRA observed that many firms lacked robust cybersecurity programs, making them vulnerable to threats like ransomware attacks and data breaches. FINRA
- Manipulative Trading: The report highlights issues such as inadequate surveillance systems and non-specific thresholds, leading to failures in detecting manipulative trading activities. comply.com+1FINRA+1
- Fixed Income – Fair Pricing: Firms were found to have outdated mark-up/mark-down grids and failed to consider the impact of mark-ups on yield to maturity, resulting in unfair pricing practices. comply.com+1FINRA+1
- Fractional Shares Reporting and Order Handling: Deficiencies were noted in reporting and supervisory systems related to fractional share transactions. Mayer Brown+2FINRA+2comply.com+2
🛡️ Emerging Risks and Areas of Focus
FINRA’s report also emphasizes emerging risks that firms should address:
- Mobile Applications: Concerns were raised about mobile apps not adequately distinguishing between broker-dealer products and those of affiliates or third parties, potentially misleading investors. Free Writings+3Greenberg Traurig+3FINRA+3
- Complex Products and Options: The report underscores the need for firms to ensure that recommendations of complex products and options are in the best interest of retail customers, with appropriate disclosures and risk assessments. FINRA+1Mayer Brown+1
- Anti-Money Laundering (AML) and Sanctions Compliance: FINRA observed lapses in firms’ AML programs, including failures in transaction monitoring and sanctions screening processes. FINRA
📘 Accessing the Full Report
For a comprehensive understanding of the findings and recommendations, you can access the full 2023 Examination and Risk Monitoring Program Report on FINRA’s official website:
Staying informed about these findings can help firms proactively address compliance issues and enhance their regulatory frameworks.
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