A Message About FINRA's Exam Program

March 18, 2013

 

Over the last several months, I have met with a number of FINRA firms about the sales practice examination program. As part of FINRA's commitment to encouraging and increasing productive dialogue with firms, I want to respond to some of the issues and concerns that I've heard during these meetings.

 

Many firms have indicated that examinations take too long to complete. As you know, we have shifted our examination program to one that is more risk-based, with a goal of making exams more targeted on areas that pose the most risk to investors. One change you will notice is that we are collecting more information from your firm prior to an exam so that examiners arrive on site with a better understanding of your firm and its business. This helps examiners be more focused, spend less time on site and close examinations faster. Not every exam will be perfect, but we are committed to making the process more effective and efficient for firms and for FINRA.

 

Another concern I've heard is about citations for minor infractions. You should know that examiners are making a concerted effort to have a conversation while on site when procedures or business practices are not up to speed. In these cases, instead of citing the firm, we are allowing firms to fix the problem while the exam is underway. I believe you'll see that our process is improving, conversations are taking place during exams, procedures are changing and firms are not being fined for isolated, minor technical violations.

 

I have also heard that firms are apprehensive about escalating issues to FINRA senior staff when they have a concern or issue with respect to an ongoing exam. I encourage you to work closely with FINRA staff and ask questions—and raise concerns—as they come up. If you are not satisfied with the response from your examiner, speak with the exam manager who is typically on site for at least a portion of the examination. If you still have questions or concerns, during an exam or afterwards, feel free to escalate them to your district director. You can find a roster of all regional and district directors with their email addresses and phone numbers here. And, you have my assurance that reaching out to them will not result in any retribution.

 

We welcome and encourage your feedback about when you feel we are getting it right and when we are not. I am personally committed to responding to issues that you raise and to continuing the dialogue so that we can improve our regulatory programs. Looking forward to hearing from you.

 

Sincerely,

 

Susan Axelrod Signature

 

Susan Axelrod
Executive Vice President
Member Regulation, Sales Practice