Every year FINRA publishes its Report on FINRA’s Examination and Risk Monitoring Program to provide member firms with key insights and observations to use in strengthening their compliance programs, said Jim Toes, President and CEO of the Security Traders Association.
Speaking during the “FINRA Check-In with Greg Ruppert” session at the STA 2023 Washington DC Spring Update, Toes said that the report reflects new and evolving risks, industry trends and noteworthy findings.
“It represents a holistic approach to FINRA regulation by leveraging information from across our regulatory operations to provide member firms with information to help them enhance their core compliance programs,” he said.
During the session, Greg Ruppert, who leads FINRA’s Member Supervision organization, a cohesive group of programs which protect investors and safeguard market integrity through surveillance and oversight of Member Firms and Registered Representatives, said that the report from FINRA’s regulatory operations covers 24 topics — including four new topics — relevant to the evolving securities industry.
“The report addresses topics that remain perennially important, with updates to reflect evolving risks, industry trends and findings from FINRA’s recent oversight activities,” he said.
“This year, we have also increased the breadth of the report’s coverage by adding several new topics focused on insights originating in our market surveillance activities,” he added.
These new topics include: Manipulative Trading; Fixed Income – Fair Pricing; Fractional Shares; and Regulation SHO.
According to Ruppert, Manipulative Trading, is “one of the most viewed pages on this report”.
“We’re really looking at this report as our way to collaborate with our member firms, in terms of what we’re seeing from a regulatory oversight perspective, but also areas that we think they could leverage the collective aspects of all of our members,” he said.
“The lifecycle of our engagement with firms is going to always start with the foundation of this report,” he added.
Additionally, the report introduced a new Financial Crimes section, consisting of three topics — Cybersecurity and Technological Governance; Anti-Money Laundering, Fraud and Sanctions; and Manipulative Trading.
Cybersecurity threats continue to be one of the most significant risks facing many customers and firms, according to Ruppert.
He said that it’s key to pay attention to what’s happening currently in this cyber fraud arena.
He said that FINRA focused on cybersecurity for years, but now they have three dedicated cyber teams – one focused on the cyber exam, cybersecurity, another focused mainly on cyber enabled criminal activity, and another on the crypto fraud in the broker dealer space or the registered representatives.
“We also did a joint analysis with NASDAQ and the NYSE, so that we’re all putting out similar warnings leveraging the collective intelligence, paying that forward for actionable steps that brokerage firms can take,” he added.
