On January 22, the Financial Industry Regulatory Authority (FINRA) issued its annual Risk Monitoring and Examination Priorities Letter. This year’s letter includes a number of new areas for firms to consider in seeking to improve their compliance, supervisory and risk management programs.
Among other things, FINRA will focus on the following items in 2019:
- sales of securities through online platforms in reliance on Rule 506(c) of Regulation D and Regulation A under the Securities Act of 1933;
- compliance with the mark-up and mark-down disclosure obligations for fixed income transactions pursuant to recent amendments to FINRA Rule 2232 (Customer Confirmations) and MSRB Rule G-15;
- regulatory technology, such as supervision and governance systems, third‑party vendor management and safeguarding customer data;
- sales practices, such as suitability determinations, protection of senior investors, outside business activities and private securities transactions;
- supervision of digital assets business, including how firms determine whether a given digital asset is a security and whether members have implemented adequate controls and supervisions related to digital assets;
- compliance with FinCEN’s Customer Due Diligence rule, which requires firms to identify beneficial owners of legal entity customers;
- market risks, including best execution, market manipulation, market access, short sales and short tenders; and
- financial risks, including credit risks, funding and liquidity planning.
FINRA also will continue to review for the adequacy of firms’ cybersecurity programs to protect sensitive information, including personally identifiable information.
FINRA’s full letter is available here.