More On Legal & Compliancefrom The Advisor's Professional Library
- The Need for Thorough and Effective Policies and Procedures Whethere an advisor is SEC or state-registered, RIAs must revise their policies and procedures to address significant compliance problems occurring during the year, changes in business arrangements, and regulatory developments.
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
FINRA ordered firms to pay $34 million in restitution in 2012—a significant jump over the $19.4 million the regulator ordered firms to repay in 2011, according to FINRA’s 2012 Annual Review.
The review, released in early January, also found that the regulator took 1,541 disciplinary actions last year, a small boost over the 1,488 actions FINRA took in 2011. Fines FINRA levied against firms and individuals decreased to $68 million in 2012 from the $71.9 million levied in 2011.
In 2012, FINRA expelled 30 firms from the securities industry, barred 294 individuals and suspended 549 brokers from association with FINRA-regulated firms. In 2011, FINRA barred 329 individuals and suspended 475.
Disciplinary highlights in 2012 involved complex products, including exchange-traded funds (ETFs), structured products and nontraded REITs, as well as research analyst conflicts, inadequate disclosure and mispricing, FINRA said.
In 2012, FINRA also says that it initiated 1,846 routine examinations, more than 800 branch office examinations and 5,100 cause examinations in response to events such as customer complaints, terminations for cause and regulatory tips.
As part of a redesign of the platform used to conduct exams, FINRA says that it “developed new technology to support and streamline the process with new technology, tools, data and new exam content that, along with the underlying risk hierarchy, make up the new, modernized framework for the risk-based examination process.” This framework, FINRA says, “is critical to identifying and prioritizing areas of risk exposure at firms, and subsequently, helping FINRA determine the appropriate regulatory response to those risks and improve our ability to quickly make decisions regarding pursuing ‘red flags’ and other areas of heightened focus.”