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FINRA Releases 2020 Risk Monitoring and Examination Priorities Letter

Simms Law, P.C. June 14, 2022

The Financial Industry Regulatory Authority (“FINRA”) recently released its 2020 Risk Monitoring and Examination Priorities Letter (“priority letter”). The priority letter, in which FINRA identifies its areas of examination focus each year, is a useful tool for organizations that are within FINRA’s regulatory purview. Below are some of the key findings from this year’s priority letter. 

2020 Priorities For FINRA

FINRA’s primary examination priorities for 2020 include: 

  • Best execution

  • Fraud

  • Insider trading

  • Market manipulation

  • Net capital

  • Customer protection

  • Trade and order reporting

  • Obligations regarding suitability determinations

  • Outside business activities

  • Private securities

  • Private placements

  • Public communications

  • Anti-money laundering 

  • Data quality

  • Governance

  • Recordkeeping

  • General supervision

  • Risk management

New Topics 

FINRA’s 2020 priority letter limits repetitive discussions of certain topics that have been covered in the past. Therefore, its 2020 priority letter focuses primarily on market integrity, sales practice and supervision, financial management, and firm operations.

Sales Practice and Supervision 

In the area of sales practice and supervision, FINRA announced in its priority letter that it plans to focus on the following: 

  • Representatives acting in positions of authority or trust

  • Senior investors 

  • Regulation Best Interest (Reg BI) and Form CRS

  • Communications with the public

  • Complex products

  • Variable annuities

  • Private placements

  • Fixed income mark-up and mark-down disclosures

  • Cash management and bank sweep programs

  • Sales of IPO shares

  • Trading authorization

Market Integrity

FINRA also plans to add additional areas of focus to the topic of market integrity, including: 

  • Best execution

  • Direct market access controls

  • Vendor display rule

  • Disclosure of order routing information

Financial Management

In the area of financial management, FINRA has indicated that it intends to focus its assessments on the following new areas: 

  • Liquidity management

  • Digital assets

  • Contractual commitment arising from underwriting activities

  • London interbank offered rate transition

Firm Operations

Finally, FINRA plans to continue evaluating firms’ supervisory controls relating to the Exchange Act Rule 10b-10, FINRA Rule 3310 (Anti-Money Laundering Compliance Program), and FINRA Rule 2232 (Customer Confirmations). In addition, FINRA will focus its assessments in this area on the following emerging topics:

  • Technology governance

  • Cybersecurity

Fort Lauderdale financial advisor representation lawyers  

At Simms Law, P.A., we focus on the representation of financial advisors who’ve been accused of breaking securities laws, rules, and regulations. Our representation of financial advisors covers a wide range of issues, including compensation issues, the expungement of disclosures through FINRA expungement proceedings, raiding-related claims, and matters pertaining to transitioning between firms. If you are a financial advisor and need representation in any of these areas or have general questions about FINRA’s examination focus areas, please contact us by phone or through one of the contact forms on our website to schedule a free consultation.