The Financial Industry Regulatory Authority’s Board plans to consider at its May 10 meeting proposed rule amendments and other steps to heighten the oversight of high-risk brokers and the firms that employ them.
The board also plans to mull issuing additional guidance on supervision requirements related to high-risk brokers.
Zeroing in on firms’ hiring and monitoring of high-risk and recidivist brokers, including whether firms establish appropriate supervisory and compliance controls for them, was included among the self-regulator’s top exam priorities for 2017.
FINRA recently set up a special exam unit to identify and examine brokers who may pose a high risk to investors.
The unit “will rigorously review” these brokers’ interactions with clients — including their compliance with rules concerning suitability, know-your-customer, outside business activities, private securities transactions, commissions and fees, the self-regulator said in releasing its priorities.
In its review of firms’ supervisory procedures for the hiring and retaining of “statutorily disqualified and recidivist brokers,” FINRA is probing whether firms are reviewing “reasonably available public records to verify the accuracy and completeness of the information contained in an applicant’s Form U4.” It also will monitor disclosures on Form U4 and U5 for the timely submission of required disclosures.
FINRA’s board will also zero in on unpaid arbitration awards, by mulling whether to propose amendments to FINRA’s Code of Arbitration Procedure for Customer Disputes and Form U4 regarding payment of arbitration awards by firms and individual brokers.
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