The Financial Industry Regulatory Authority plans to issue guidance in the coming months on areas that broker-dealers should focus on regarding Regulation Best Interest compliance and also is mulling some exam changes, FINRA CEO Robert Cook said Wednesday.
Three months into Reg BI taking hold, FINRA is assessing what it’s noticed recently during exams “with a view to develop a response to this question: What are we seeing early days, and what guidance would we suggest to the industry about areas to focus on?” Cook said during the Securities Industry and Financial Markets Association’s Compliance & Legal virtual event.
“There are some areas that we’ve identified where we see some trends or patterns where firms might think about spending some more time” in terms of Reg BI compliance, Cook said.
“We recognize this was put into place in the middle of a pandemic or the final stages occurred during the middle of a pandemic,” he explained. “A lot of effort by firms went into coming into compliance. There may be some areas where, now that it’s up and running, [we can] go back and make sure things are working as well as they could.”
Cook said FINRA will partner with the Securities and Exchange Commission on its guidance.
Also pre-COVID, FINRA’s “cycle exams almost always included some in-person element,” he said. “It might be quite short, but there’s almost always an in-person element to a cycle exam.”
(FINRA conducts up to 2,000 risk-based cycle examinations each year to assess identified risks and controls and determine whether firms are in compliance with federal securities laws, rules and regulations.)
Going forward, Cook continued, FINRA will take a look “at doing the in-person component more on a risk-based framework. So decide on a case-by-case basis whether or not it makes sense to include an in-person component.”
He also said that while FINRA has pushed, through a rule filing, the 2020 branch inspections to March 2021, “what I’ve asked our staff to work on is a proposal that we can work through with the SEC to allow firms to conduct remote inspections for 2020 and 2021.”