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June 30, 2011 at 08:00 PM
WASHINGTON BUREAU — The Financial Industry Regulatory Authority is responding to the criticism prompted by the Bernard Madoff scandal by intensifying its exam process.
Richard Ketchum, chairman of FINRA, Washington, talked about the changes here earlier this week at a regulatory conference organized by the Insured Retirement Institute, Washington.
Ketchum said FINRA has added 20 more coordinators to its district staff, for a total of 90 district staff dedicated to the surveillance function.
“Our goal is to have a much more in-depth understanding of your firms and how they are changing from the standpoint of business model, products and market events,” Ketchum said.
He said FINRA examiners are using both paper and electronic means to verify that customer assets exist and are being held on behalf of customers in secure locations.
“We are using more sophisticated risk analysis to help ensure our examiners are asking the right questions when they walk in the door,” Ketchum said.
Ketchum added that FINRA examiners are also paying closer attention to branch-level activity–increasing the number of branch exams, and refocusing exams at point-of-sale.
“The examination staff is spending more time on site at the branch offices and, depending on the firm, less time at the main office,” Ketchum said. “The point of sale and interface is where we have historically found troubling conduct, so we want to better target our resources. There will be a number of core areas that examiners will look at during these on-site examinations, and likely engage in more dialogue with branch management as part of that process.”
