WASHINGTON — Today, FINRA published a report on conflicts of interest in the broker-dealer industry to highlight effective conflicts management practices that may go beyond current regulatory requirements and identify potential problem areas. In July 2012, FINRA initiated a dialogue with several large firms to review their conflicts management practices to better understand how the industry identifies and manages conflicts.
While many firms have made progress in improving the way they manage conflicts, our review reveals that firms should do more. To help firms analyze the conflicts they face and implement a conflicts management framework appropriate to the size and scope of their business, we are publishing examples of how some large broker-dealer firms address conflicts. These practices—as well as those that are based on FINRA's experience and analysis—can help firms of all sizes improve their conflicts management practices. Of course, there is no one-size-fits-all framework. Firms need to assess the approach that is most effective for their particular circumstances.
FINRA will continue to assess firms' conflicts management practices and the effectiveness of those practices in protecting customers' interests through its examination and oversight programs.
Highlights of Report on Conflicts of Interest
In July 2012—as an outgrowth of our mission to protect investors and consequent longstanding attention to conflicts issues—FINRA initiated a review at a number of large firms to better understand how they manage conflicts of interest and to identify effective practices to manage those conflicts.
FINRA is publishing this Report on Conflicts of Interest to share those practices and help firms of all sizes strengthen their own conflicts frameworks. Of course, there is no one-size-fits-all approach, but FINRA believes an effective conflicts management framework should address the following considerations, among others:
While this report recognizes that many broker-dealer firms have made progress in improving the way they manage conflicts, it also emphasizes that there is still more firms need to do. FINRA will continue to review how firms manage conflicts and evaluate the effectiveness of firms' efforts. If we find that firms have not made adequate progress, we will evaluate rulemaking to require reasonable policies to identify, manage and mitigate conflicts.