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FINRA's Top 5 Exam Priorities in 2020

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The Financial Industry Regulatory Authority will spend the first part of 2020 zeroing in on broker-dealers’ compliance with the Securities and Exchange Commission’s Regulation Best Interest and the advice-standards package’s Customer Relationship Summary, or Form CRS.

FINRA’s 2020 exam priorities letter addresses new and emerging areas, noted FINRA CEO Robert Cook, and “will mark an important inflection point in FINRA’s risk monitoring and examination program,” as FINRA has integrated its three different exam programs into a single framework.

FINRA member firms are now grouped into one of five main firm business models: Retail, Capital Markets, Carrying and Clearing, Trading and Execution, and Diversified.

When examining for compliance with Reg BI — which will be required as of June 30 — FINRA will review the following:

  • Procedures and training in place to assess recommendations using a best interest standard
  • Whether the firm and its associated persons apply a best interest standard to recommendations of types of accounts
  • If your firm and your associated persons agree to provide account monitoring, do you apply the best interest standard to both explicit and implicit hold recommendations?
  • Whether the firm and associated persons consider the express new elements of care, skill and costs when making recommendations to retail customers
  • Do your firm and your associated persons consider reasonably available alternatives to the recommendation?
  • Whether the firm and registered reps guard against excessive trading, irrespective of whether the broker-dealer or associated person “controls” the account
  • Firm’s policies and procedures to provide the disclosures required by Reg BI, to identify and address conflicts of interest, and regarding the filing, updating and delivery of Form CRS.

Check out the gallery above to see FINRA’s top exam priorities for 2020.

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