Few things kill that holiday season buzz and tell us it is time to get back to work like the SEC’s and FINRA’s 2016 Examination Priorities Letters.
For 2016, FINRA has decided to get to the heart of the regulatory matter by looking closely at the culture of Broker/Dealers as it relates to theircompliance practices. FINRA expects to look at how a firm’s culture influences how it does business and manages conflicts of interest. FINRA will be assessing the following which they consider to be indicators of a firm’s culture –
- Whether control functions are valued within the organization
- Whether policy or control breaches are tolerated
- Whether the organization proactively seeks to identify risk and compliance events
- Whether supervisors are effective role models of firm culture
- Whether sub-cultures (eg. trading desk, branch offices, etc.) that are not conforming to the overall corporate culture are identified and problems addressed
The idea that a firm’s culture provides an implicit green light to unlawful actions by traders and reps has merit. It will be interesting though,to see how much success FINRA can have in affecting cultural change in firms that it feels are lax in identifying risky behavior or reforming supervisors it considers to be less than effective role models.
The SEC for its part, is continuing the initiatives it announced in 2015 to examine whether the types of accounts recommended and level of advice offered to clients when they start an advisory relationship are in the client’s best interests. The SEC will also continue to evaluate whether investment advisors’ cybersecurity controls are sufficient and whether safe cybersecurity protocols are being followed.
Again, remember to block out the morning of Wednesday, March 9th for your annual trip to the State Capital. FPA Minnesota offers this wonderful opportunity to participate in your democracy but once a year!