BDs to Benefit from FINRA360 Changes to Enforcement and Exam Process

As part of its continuing efforts to review and revamp the organization (i.e. FINRA360), FINRA has consolidated its enforcement units in order to streamline investigations, improve consistency and transparency and, ultimately, improve relationships with member firms.

Prior to this consolidation, trading violations and non-trading violations such as market conduct and suitability-related issues were handled by separate units. The units often issued simultaneous requests for information, levied substantially different fines and were perceived to send mixed messages, which made it difficult for firms to understand how to change behavior to achieve compliance. Consolidation will streamline the disciplinary process for the organization and member firms, increase consistency, and will improve transparency regarding the reasons certain cases are sent to enforcement, thus reducing the perception of ‘rulemaking by enforcement’ that has developed. Other beneficial changes include enhancing FINRA’s risk-based approach to examinations, examination schedules that consider business models rather than relying exclusively on calendar-driven examination frequency, and improvements in how FINRA interacts with member firms in the examination process.

The FINRA360 Initiative is a multi-year initiative, which has made significant progress in its first year including, among other accomplishments: releasing an Examinations Findings Report detailing FINRA’s observations from the prior year’s examinations, publishing a summary of FINRA’s 2018 budget and financial guiding principles, launching a Small Firm Helpline for member firms, creating an Innovation Outreach Initiative to address FinTech, cryptocurrencies and related issues, increasing funding for training of examiners and regulatory coordinators, and enhancing transparency regarding what FINRA’s advisory and governance committees do and how interested parties can get involved, in addition to consolidating the enforcement units and making improvements to the examination process.

The initiative continues with its ongoing efforts to make organizational changes that benefit investors, increase efficiency, transparency, and engagement and improve relationships with member firms.