The Financial Industry Regulatory Authority released Wednesday its 2022 exam report, which details the initial findings from its exams of broker-dealers’ compliance with Regulation Best Interest and rules around the customer relationship summary, or Form CRS.
Those regulations became effective on June 30, 2020, and 2021 marked the first full calendar year during which FINRA examined how firms have implemented the rules.
FINRA said it will share further findings as it conducts exams and gathers additional information on firms’ practices.
Reg BI deficiencies cited by FINRA include:
- Associated persons or firms using the terms “advisor” or “adviser” in their titles or firm names without the appropriate registration;
- failing to modify existing policies and procedures to reflect Reg BI’s requirements; and
- failing to limit high-risk or complex investments for retail customers.
Form CRS failures include, according to the report:
- Deficient Form CRS filings
- Inaccurately representing financial professionals’ disciplinary histories
- Failing to describe types of compensation and compensation-related conflict
- Failure to post Form CRS properly on websites
- Changing or excluding language required by Form CRS.
The report also provides 2022 exam guidance for sellers of variable annuities.
In its report, FINRA cites five new compliance areas that it examined in 2021 — along with deficiencies in each — that firms should focus on in 2022. The five areas are: