FINRA360 Progress Report
We launched FINRA360 in March 2017 with one overarching objective: to ensure that FINRA is operating as the most effective and efficient self-regulatory organization (SRO) we can be.
The time was right for such a review. In the 10 years since the NASD and NYSE Regulation merged to form FINRA, the industry and financial markets have changed significantly. And in traveling around the country and meeting with a broad range of stakeholders since I became CEO in August 2016—including many of our members, as well as investors, investor advocates, regulators, trade associations and FINRA employees—I heard a lot about what FINRA is doing well and where there are opportunities for improvement.
One of our first steps under FINRA360 was to publish a Special Notice on Engagement in March 2017 to provide interested stakeholders with an opportunity to give us their input and feedback about FINRA. As we had hoped, a large number of parties provided us with extensive and detailed comments. FINRA360 provided a framework to address this and other feedback we have received, to engage in a thoughtful analysis to determine opportunities for improvement, and to make changes that will produce a more effective, more efficient organization. Throughout the past year, I have directed our staff to consider any changes that will improve FINRA while better serving the interests of investors and promoting strong and vibrant capital markets.
Our work under FINRA360 also must reflect our unique identity as an SRO that stands at the intersection of regulation and industry. Our mission is investor protection and market integrity, and our task is to work with our members, investors and other stakeholders to cultivate a deep expertise in the securities industry that enables a more effective regulatory framework and promotes vibrant capital markets. As an SRO, for example, we are in a position to involve the industry more directly in our deliberations and thus benefit from their expertise on relevant matters, such as the different business models of firms and how they operate in practice, the complex and rapidly evolving securities markets in which they trade, and the concerns of the wide range of investors they serve. We can combine what we learn from the firms we regulate with the input we actively seek from the investing public and others representing them to enrich our regulatory programs and develop solutions that are more practical, tailored and effective. And we can develop compliance tools and other resources to assist our members with fulfilling their regulatory obligations.
As indicated in the attached Progress Report, the first year of FINRA360 is already resulting in significant change across the organization. This effort has involved hundreds of stakeholders and FINRA staff in an effort to improve our efficiency and operations. Major actions to date include:
- integrating our two Enforcement programs into a single unified structure;
- releasing an Examinations Findings Report publicly detailing our observations from the prior year's examinations;
- publishing a summary of our 2018 budget and of our financial guiding principles;
- launching a Small Firm Helpline to address routine questions about FINRA;
- creating an Innovation Outreach Initiative to address the growing activity in FinTech;
- increasing funding for training of examiners and regulatory coordinators;
- updating the activities of our advisory and governance committees and enhancing our transparency regarding what they do and how interested parties can get involved; and
- further advancing our risk-based approach to examinations and implementing certain process improvements in how we interact with member firms in the exam context.
In analyzing the suggestions and comments we received and deciding which ones to implement, we have placed particular emphasis on changes that benefit investors, promote compliance, address duplicate operations, enhance transparency, foster engagement or improve our day-to-day supervisory interactions with firms. We believe that these priorities provide us with a framework for analysis that ensures any changes we select for implementation have the greatest positive impact on FINRA, investors and the industry.
Over the past year, in the midst of the ongoing change sparked by FINRA360, our staff has remained focused on performing our many operational and supervisory responsibilities, including examinations, surveillance and enforcement. And in the normal course of doing this work, we also have made many enhancements and improvements to our operations that are not discussed in the attached report. To mention just a few examples, during the last year we have continued to enhance our ability to identify and take action against brokers and firms that present heightened risk of fraud or investor harm, we implemented a new regulation to enhance protections for senior investors, we successfully implemented a system for reporting (for the first time) transactions in U.S. Treasury securities by our members, and we published a comprehensive analysis of options to address arbitration awards that go unpaid while issuing several rule proposals related to such awards.
A year into what I have often emphasized is a multi-year initiative, we have accomplished a great deal, but we still have much more work ahead of us. We are turning our attention in the coming year to our Examination program and a number of other areas where we think we can achieve additional meaningful change. These may include larger organizational changes as well as smaller improvements that collectively will have significant impacts on our day-to-day interactions with the firms we regulate and the investing public we protect. Expect more to come.
President and Chief Executive Officer
Table of Contents
- Changes to FINRA Enforcement Structure
- FINRA Examination Program Improvements
- FINRA 2018 Annual Budget Summary and Financial Principles
- Data and Analytics
- Regulatory Operations Oversight Committee (ROOC)
- Remote Branch Office Inspections
- Examination Findings
- Investor Education and Tools
- Changes to FINRA Advisory Committees
- Small Firm Helpline
- Changes to FINRA Rulemaking Process
- Changes to Engagement with Member Firms: Compliance Tools and Resources
- Innovation Outreach Initiative
- Industry Continuing Education
- FINRA Governance and Transparency