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Changes to Engagement with Member Firms: Compliance Tools and Resources

Background

In response to the March 2017 Special Notice on Engagement issued as part of FINRA360, FINRA received a number of comments and suggestions regarding ways in which FINRA could help facilitate compliance among its member firms. One of FINRA's defining characteristics as a self-regulatory organization (SRO) is the ability to develop compliance tools and other resources to assist our members with fulfilling their compliance obligations. After careful review of the comments and suggestions received, FINRA has taken a number of actions.

Providing Compliance Tools and Resources

FINRA introduced a compliance calendar to help firms keep track of not just upcoming filing requirements and other significant deadlines, but also educational opportunities. Based on feedback heard from the industry and from the Special Notice, FINRA added a number of enhancements to the compliance calendar, including the ability to add an event to a personal calendar, email an event and export a month's events. We also launched a calendar that contains events specific to a firm, such as reporting deadlines, on the Firm Gateway in May 2018.

FINRA also introduced the FINRA Compliance Vendor Directory, a convenient option for firms searching for vendors that offer compliance-related products and services, such as compliance consultants, cybersecurity experts and exam prep resources. Firms can compare multiple vendors side by side.

“Meeting with FINRA members across the country and during committee meetings are some of the opportunities FINRA has to have a dialogue with members and to better understand the impact of regulation. The tools and resources, such as the new Small Firm Helpline, the Compliance Vendor Directory and the Compliance Calendar, as well as the recent Regional Networking Forums, were developed based on firm feedback and we welcome the ideas.”

— Chip Jones, FINRA Senior Vice President, Member Relations and Education

In addition, FINRA has begun holding Regional Member Networking Forums (Forums). The Forums, created in response to feedback received on FINRA's Special Notice on Engagement, are designed to provide individuals associated with FINRA member firms opportunities to engage in key discussions with FINRA senior and regional staff and connect with industry leaders and peers.

Education

In response to feedback received through the Special Notice on Engagement, FINRA has continued to host and expand its menu of educational resources. A complete list of FINRA hosted conferences and events can be found at www.finra.org/industry/conferences-events. Since launching the FINRA360 initiative, FINRA has hosted a Blockchain Symposium, a Cybersecurity Conference, a RegTech Conference, a Disclosure Reporting, Monitoring and Registration Conference, and introduced Anti-Money Laundering (AML) Half-Day Seminars.

In 2017, FINRA began offering Certified Financial Planner (CFP) continuing education credits for all of its conferences and the Certified Registered Compliance Professional program. In addition, more than 60 e-learning courses have become eligible for CFP continuing education credits.

FINRA lowered the small firm registration fee for all conferences in 2018. In addition, FINRA increased the number of small firm scholarships to its Certified Regulatory and Compliance Professional (CRCP) program from three to five in 2018.

Surveillance Report Cards

Although firms generally surveil and review trades for manipulation, bad actors can conceal their activity by trading across multiple firms, markets and products. This activity can be very hard for any individual firm to detect, so we now alert members when our sophisticated surveillance programs flag a suspicious trading pattern. These report cards do not reflect conclusions that violations have occurred. Rather, they indicate potential problems that a firm needs to review. Firms can use this information to upgrade their internal controls and to address any problematic activity long before FINRA can complete a formal investigation.

FINRA's Report Center supports member firms' compliance activities by providing online access to over 40 different reports on a broad scope of compliance data, ranging from trading activity across products to risk monitoring to disclosure.

We also have introduced several new report cards covering a variety of regulatory areas, including report cards on potential ATS cross manipulation, potential auto execution manipulation, treasury trade reporting and the large option position report cards.

SIPC Agreement to Ease Reporting Burdens and Compliance Costs

Streamlining a regulatory filing requirement in a manner that reduces burdens on firms while preserving important investor protections is consistent with the goals of FINRA360. In August 2017, FINRA and the Securities Investor Protection Corporation (SIPC) announced a services agreement designed to ease reporting burdens and compliance costs for member firms. The simplified filing process also reduces inconsistent or incomplete filing of annual audited financial statements and supplementary reports.

Under the agreement, firms that currently file annual reports separately with SIPC and FINRA will file just once, using FINRA's existing reporting portal. The portal will provide both agencies with the information, enabling the firms to meet the two agencies' respective reporting requirements with a single filing.

Identifying and Reporting Hedge Transactions in U.S. Treasury Securities

Member firms have raised concerns about operational difficulties in trade-day reporting of U.S. Treasury security transactions that are executed to hedge a primary-market transaction in a new-issue, TRACE-eligible security, particularly when that issuance occurs late in the day. In response, FINRA filed a proposal with the SEC which has since been approved to provide firms additional time to report to FINRA’s Trade Reporting and Compliance Engine their transactions in U.S. Treasury securities to hedge primary-market transactions and also adopt a new modifier to identify such transactions. The proposal is designed to improve compliance and ease operational concerns while not diminishing transparency.

Summary of Actions

  • Launched FINRA Unscripted, a new podcast series featuring senior FINRA executives discussing issues pertinent to member firms.
  • Released a three-part video series that addresses common deficiencies seen during examination of firms' cybersecurity programs.
  • Held a RegTech conference to provide a forum for regulators, thought leaders and industry practitioners to learn more about the use of RegTech tools, and related opportunities and challenges.
  • Held a Disclosure Reporting, Monitoring and Registration Conference with experts discussing regulatory reporting requirements and industry practices related to firm registrations.
  • Held a cybersecurity conference with experts and regulators to focus on key ways the industry can maintain cybersecurity.
  • Created a Compliance Calendar to help firms keep track of significant deadlines and educational opportunities.
  • Based on member feedback, implemented a number of enhancements to the Calendar, including the ability to add an event to a personal calendar and email an event, as well as adding a new "Rule Filings" category to the calendar to provide new rules' effectiveness and implementation dates.
  • Created a FINRA Compliance Vendor Directory for firms searching for vendors that offer compliance-related products and services, such as compliance consultants, cybersecurity experts and exam prep resources.
  • Launched new monthly report designed to help brokerage firms supervise pricing of corporate and agency bond transactions. The report was issued to help firms comply with a rule that went into effect in May 2018 requiring that firms disclose on confirmations for retail customers the markup or markdown for certain bond transactions.
  • Began holding Regional Member Networking Forums.
  • Revamping finra.org to better highlight Report Center tutorials.
  • Evaluating the eFOCUS system to determine what, if any, changes may be made to streamline the financial filing process for firms. 
  • Promoting availability of FINRA email subscription lists.
  • Provide immediate notification through RSS feeds when new information is posted on certain FINRA webpages.
  • Added a new RSS feed for the Disciplinary Actions, allowing interested persons to be notified when the monthly Disciplinary Actions are released.
  • Enhanced the FINRA Weekly Updates Archive to allow the content to be searchable.
  • Introduced several new report cards, including report cards on potential ATS cross manipulation, potential auto execution manipulation and the large option position report cards.
  • Signed a services agreement with SIPC to ease reporting burdens and compliance costs for member firms by implementing an automated process to provide SIPC with electronic copies of the annual audits FINRA receives from firms that are also SIPC members.
  • Increased the number of small firm scholarships to the CRCP program in 2018.
  • Significantly reduced the registration cost of FINRA conferences for small firms.
  • Offering events on more specialized topics of interest to firms, including new AML Half-Day Seminars, a Blockchain Symposium, a Cybersecurity Conference, and a Registration and Disclosure Conference.
  • Produced a video on the criteria FINRA uses to identify high-risk activity, and tools and resources that are available to help firms perform their own reviews.
  • Produced a video on the nine risks that inform FINRA's Examination and Surveillance Program.