FINRA Sweeps BDs for Info on VIX-Linked Products
The exam sweep covers member firms and advisors selling these products between October 2017 and February 2018.
The Financial Industry Regulatory Authority said it is conducting a targeted review of products linked to the Chicago Board Options Exchange Volatility Index (VIX).
FINRA posted an exam letter saying that its review will focus on the supervisory processes followed by the firm to identify and mitigate sales practice risks associated with recommendations to non-institutional purchasers of VIX-linked products. This includes, but is not limited to, unsuitable recommendations, misrepresentations and appropriateness of any required disclosures to customers.
FINRA will also assess the firm’s supervisory controls with respect to product vetting, testing, and approval in this space.
FINRA asks that firms provide documents and information applicable to the period October 1, 2017, through February 28, 2018, by no later than April 20, 2018.
For example, firms will need to provide written supervisory procedures, compliance manuals, training materials, and any other written guidance given to its registered persons regarding the solicitation, recommendation, and supervision of VIX-linked products.
They’ll also need to provide an electronic copy of all VIX-linked securities transactions effected within accounts of non-institutional customers during the review period.
In addition to other information, firms will also have to produce copies of any customer complaints concerning VIX-linked products.
FINRA and other regulators conduct targeted exams, known as sweeps, to gather information and carry out investigations. Sweep information is used to focus examinations and pinpoint regulatory response to emerging issues.
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