Dan Brecher
Counsel
212-286-0747 dbrecher@sh-law.comFirm Insights
Financial Industry Regulatory Authority: What Are They Looking For In 2014
Author: Dan Brecher
Date: January 17, 2014
Key Contacts
Back
What Will Financial Industry Regulatory Authority 2014 Examiners Be Looking for in 2014?
The Financial Industry Regulatory Authority (FINRA) recently released a letter outlining its regulatory and examination priorities for 2014. It should be considered “must read” material for all broker dealers.
Susan Axelrod, Executive Vice President, Regulatory Operations, said, “The purpose of this letter is to provide insight to the industry on specific areas of concern for our regulatory programs in the coming year. We encourage firms to use this guidance along with their own analysis to enhance their programs as we will be examining for strong controls and robust compliance efforts in these areas.”
The Financial Industry Regulatory Authority letter addresses a wide range of issues, including business conduct, fraud, financial and operational concerns, and market regulation. Below are some of the highlights:
Recidivist brokers:
New to Financial Industry Regulatory Authority’s exam priorities are so-called recidivist brokers, those who have a pattern of complaints or disclosures for sales practice abuses. The enhanced scrutiny means that firms should thoroughly investigate all new hires and have procedures in place for heightened supervision of brokers who may have questionable backgrounds. Financial Industry Regulatory Authority plans to use both its High Risk Broker initiative and its Broker Migration Model to focus its enforcement efforts.
Cybersecurity:
In the wake of several high-profile data breaches impacting the financial industry, Financial Industry Regulatory Authority plans to assess the integrity of firms’ policies, procedures, and controls to protect sensitive customer data. Accordingly, firms should evaluate and test their current data protection procedures to detect and address any potential weaknesses.
IPOs:
As the market for initial public offerings (IPOs) continues to heat up, examiners will be keeping a close eye on firms entering the underwriting business or significantly expanding their activities in this area. Financial Industry Regulatory Authority specifically cites compliance with Rule 5131 which, among other things, prohibits quid pro quo allocations and “spinning,” and addresses the conduct of firms and associated persons in the areas of book-building, new issue pricing, penalty bids, trading and waivers of lock-up agreements, as primary concern.
Liquidity risks:
Starting this year, Financial Industry Regulatory Authority will take enhanced steps to assess the funding and liquidity risks of regulated firms. Larger firms will be required to conduct liquidity stress tests, which will focus on the impact of a loss of funding for their proprietary positions, their repo book, settlement and depository payments, and funding of customer balances.
Algorithmic trading:
Citing algorithmic trading malfunctions that caused substantial market disruptions, Financial Industry Regulatory Authority plans to monitor whether firms’ testing and controls related to high-frequency trading (HFT) and other algorithmic trading strategies and trading systems are adequate in light of the Market Access Rule and firms’ other supervisory obligations. Oversight may be conducted through both examinations and targeted investigations, according to the letter.
Among other top concerns, the letter also addresses perennial favorites like suitability, conflicts of interest, complex products, and anti-money laundering efforts. Finally, Financial Industry Regulatory Authority has indicated that it will update its view on risk throughout the year, and registered firms should do the same.
If you have any questions about Financial Industry Regulatory Authority’s 2014 regulatory and examination priorities, please feel free to fill out the comment section below.
- Practices: Securities Litigation & FINRA Arbitrations, Corporate Governance and Regulatory Compliance
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
Does Your Homeowners Insurance Provide Adequate Coverage?
Your home is likely your greatest asset, which is why it is so important to adequately protect it. Homeowners insurance protects you from the financial costs of unforeseen losses, such as theft, fire, and natural disasters, by helping you rebuild and replace possessions that were lost While the definition of “adequate” coverage depends upon a […]
Author: Jesse M. Dimitro
Understanding the Importance of a Non-Contingent Offer
Making a non-contingent offer can dramatically increase your chances of securing a real estate transaction, particularly in competitive markets like New York City. However, buyers should understand that waiving contingencies, including those related to financing, or appraisals, also comes with significant risks. Determining your best strategy requires careful analysis of the property, the market, and […]
Author: Jesse M. Dimitro
Fred D. Zemel Appointed Chair of Strategic Planning at Scarinci & Hollenbeck, LLC
Business Transactional Attorney Zemel to Spearhead Strategic Initiatives for Continued Growth and Innovation Little Falls, NJ – February 21, 2025 – Scarinci & Hollenbeck, LLC is pleased to announce that Partner Fred D. Zemel has been named Chair of the firm’s Strategic Planning Committee. In this role, Mr. Zemel will lead the committee in identifying, […]
Author: Scarinci Hollenbeck, LLC
Novation Agreement Process: Step-by-Step Guide for Businesses
Big changes sometimes occur during the life cycle of a contract. Cancelling a contract outright can be bad for your reputation and your bottom line. Businesses need to know how to best address a change in circumstances, while also protecting their legal rights. One option is to transfer the “benefits and the burdens” of a […]
Author: Dan Brecher
What Is a Trade Secret? Key Elements and Legal Protections Explained
What is a trade secret and why you you protect them? Technology has made trade secret theft even easier and more prevalent. In fact, businesses lose billions of dollars every year due to trade secret theft committed by employees, competitors, and even foreign governments. But what is a trade secret? And how do you protect […]
Author: Ronald S. Bienstock
What Is Title Insurance? Safeguarding Against Title Defects
If you are considering the purchase of a property, you may wonder — what is title insurance, do I need it, and why do I need it? Even seasoned property owners may question if the added expense and extra paperwork is really necessary, especially considering that people and entities insured by title insurance make fewer […]
Author: Patrick T. Conlon
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Financial Industry Regulatory Authority: What Are They Looking For In 2014
Author: Dan Brecher
What Will Financial Industry Regulatory Authority 2014 Examiners Be Looking for in 2014?
The Financial Industry Regulatory Authority (FINRA) recently released a letter outlining its regulatory and examination priorities for 2014. It should be considered “must read” material for all broker dealers.
Susan Axelrod, Executive Vice President, Regulatory Operations, said, “The purpose of this letter is to provide insight to the industry on specific areas of concern for our regulatory programs in the coming year. We encourage firms to use this guidance along with their own analysis to enhance their programs as we will be examining for strong controls and robust compliance efforts in these areas.”
The Financial Industry Regulatory Authority letter addresses a wide range of issues, including business conduct, fraud, financial and operational concerns, and market regulation. Below are some of the highlights:
Recidivist brokers:
New to Financial Industry Regulatory Authority’s exam priorities are so-called recidivist brokers, those who have a pattern of complaints or disclosures for sales practice abuses. The enhanced scrutiny means that firms should thoroughly investigate all new hires and have procedures in place for heightened supervision of brokers who may have questionable backgrounds. Financial Industry Regulatory Authority plans to use both its High Risk Broker initiative and its Broker Migration Model to focus its enforcement efforts.
Cybersecurity:
In the wake of several high-profile data breaches impacting the financial industry, Financial Industry Regulatory Authority plans to assess the integrity of firms’ policies, procedures, and controls to protect sensitive customer data. Accordingly, firms should evaluate and test their current data protection procedures to detect and address any potential weaknesses.
IPOs:
As the market for initial public offerings (IPOs) continues to heat up, examiners will be keeping a close eye on firms entering the underwriting business or significantly expanding their activities in this area. Financial Industry Regulatory Authority specifically cites compliance with Rule 5131 which, among other things, prohibits quid pro quo allocations and “spinning,” and addresses the conduct of firms and associated persons in the areas of book-building, new issue pricing, penalty bids, trading and waivers of lock-up agreements, as primary concern.
Liquidity risks:
Starting this year, Financial Industry Regulatory Authority will take enhanced steps to assess the funding and liquidity risks of regulated firms. Larger firms will be required to conduct liquidity stress tests, which will focus on the impact of a loss of funding for their proprietary positions, their repo book, settlement and depository payments, and funding of customer balances.
Algorithmic trading:
Citing algorithmic trading malfunctions that caused substantial market disruptions, Financial Industry Regulatory Authority plans to monitor whether firms’ testing and controls related to high-frequency trading (HFT) and other algorithmic trading strategies and trading systems are adequate in light of the Market Access Rule and firms’ other supervisory obligations. Oversight may be conducted through both examinations and targeted investigations, according to the letter.
Among other top concerns, the letter also addresses perennial favorites like suitability, conflicts of interest, complex products, and anti-money laundering efforts. Finally, Financial Industry Regulatory Authority has indicated that it will update its view on risk throughout the year, and registered firms should do the same.
If you have any questions about Financial Industry Regulatory Authority’s 2014 regulatory and examination priorities, please feel free to fill out the comment section below.