Targeted Examination Letters

July 2012

 

Re: Conflicts of Interest
 
FINRA is reviewing how firms identify and manage conflicts of interest. As part of this review,
we would like to meet with executive business and compliance staff of your firm to discuss the firm’s approach to conflict identification and mitigation. At the meeting, we would like your firm to present on, among other conflicts related topics, the most significant conflicts your firm is currently managing and the processes in place to identify and assess whether business practices put your firm's—or your employee’s—interests ahead of those of your customers.

 

This inquiry is not an indication that FINRA has determined that your firm has violated any rules or regulations. FINRA’s goal in speaking with firms about their conflict identification and review process is to better understand industry practices and determine whether firms are taking reasonable steps to properly identify and manage conflicts that could affect their clients or the marketplace. Knowing what firms do to address conflicts and the challenges they face will help FINRA develop potential guidance for the industry and determine other steps FINRA could consider taking in this area.

 

In preparation for the referenced meeting, we request that your firm submit the following information to FINRA by September 14, 2012:

 

  1. Summary of the most significant conflicts the firm is currently managing.
  2. Names of departments and persons responsible for conducting conflicts reviews.
  3. Summary of the types of reports or other documents prepared at the conclusion of a conflicts review.
  4. Names of departments and persons who receive any final report or other documentation summarizing a conflicts review.
  5. Available dates and times in the fourth quarter of 2012 that executive management of your firm can meet with FINRA staff for approximately three hours to discuss the firm’s approach to conflicts of interest.