Regulatory and Examination Priorities Letter

On January 8, the Financial Industry Regulatory Authority (FINRA) released its annual Regulatory and Examination Priority Letter detailing various issues that will be the subject of particular regulatory focus and scrutiny this year. Many of the areas noted are carry-overs from previous years, including the protection of senior investors and other retail customers, new product suitability reviews, and enhanced scrutiny of high-risk brokers. However, the letter also reflects various new issues that have caught FINRA’s attention and will require increased attention by FINRA member firms.
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The Financial Industry Regulatory Authority is requesting firms to submit information regarding their organizational culture and how those values impact business decisions. FINRA’s 2016 Regulatory and Examination Priorities Letter defined “firm culture” as “the set of explicit and implicit norms, practices and expected behaviors that influence how employees make and carry out decisions in the course of conducting the firm’s business.” FINRA believes that a broker-dealer’s view of firm culture” influences how the firm conducts its business and manages conflicts of interest. For example, FINRA notes that firms have encountered $300 billion in fines and litigation costs related to cultural failures since 2010.
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