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PODCAST

MAP Transformation: Streamlining FINRA's Gatekeeper Function

April 19, 2022

Member Supervision's Membership Application Program Group is the gatekeeper to the broker-dealer industry. It works both to protect investors by ensuring would-be firms meet FINRA's Standards of Admission and to help new and existing firms grow and evolve, ensuring a vibrant market for all. Now, the program is undergoing a transformation.

On this episode, we hear from Cindy Foster, the new head of MAP, to hear how the group is working to develop a more streamlined process to help firms and prospective firms work through the New Membership and Continuing Membership Application processes more efficiently.

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Resources mentioned in this episode:

Broker-Dealer Registration

FINRA Standards for Admission

Information Notice: MAP Transformation

Phone: 212-858-4000, option five

Email: [email protected]

Listen and subscribe to our podcast on Apple PodcastsGoogle PodcastsSpotify or wherever you listen to your podcasts. Below is a transcript of the episode. Transcripts are generated using a combination of speech recognition software and human editors and may contain errors. Please check the corresponding audio before quoting in print. 

FULL TRANSCRIPT 

00:00 - 00:34

Kaitlyn Kiernan: Member Supervision's Membership Application Program Group is the gatekeeper to the broker-dealer industry. It works both to protect investors by ensuring would-be firms meet FINRA's Standards of Admission and to help new and existing firms grow and evolve, ensuring a vibrant market for all. Now, the program is undergoing a transformation to develop a more streamlined process to help firms and prospective firms work through the New Membership and Continuing Membership Application processes more efficiently. On this episode, we hear from the new head of the MAP group to hear what firms can expect.

00:34 – 00:43

Intro Music

00:43 - 00:59

Kaitlyn Kiernan: Welcome to FINRA Unscripted. I'm your host, Kaitlyn Kiernan. I'm pleased to welcome back to the show and old guest in a new role. Today, we have Cindy Foster, vice president of the Membership Application Program, or MAP, with Member Supervision. Cindy, welcome back.

00:59 - 01:01

Cindy Foster: Thanks, Kaitlyn. It's good to be here.

01:01 - 01:16

Kaitlyn Kiernan: So, Cindy, you are joining us to detail some changes underway within the MAP program. But before we get to that, can you briefly reintroduce yourself to our listeners? When we last spoke, you were FINRA's Ombudsman. And what is it you do now?

01:17 - 01:49

Cindy Foster: Yes, you're right. Member Supervision is the latest stop on my journey within FINRA. And I joined Member Supervision last July, but I've had a pretty long career at FINRA. I worked in several departments over the years, CRED, Market Regulation in several different roles, and, as you mentioned, the Ombuds role, and now I'm in Member Supervision and I head up the Membership Application Program as well as the Statutory Disqualification program.

01:51 - 02:09

Kaitlyn Kiernan: Great. So, you are familiar with probably all aspects of FINRA's business from your tour around the organization over the years, so I'm sure that helps with your current role. But can you tell me more about the Membership Application Program team? What is MAP and what are its primary responsibilities?

02:09 - 03:09

Cindy Foster: So, I would say that MAP has one of the most important and essential roles at FINRA. We work with prospective FINRA members to make sure that they're ready to engage in the brokerage industry and engage in securities transactions activities in the U.S. Any firm that wants to become a registered broker-dealer must submit a New Membership Application, or NMA, to MAP.

Prospective member firms are required to provide detailed information about their financial, operational, supervisory and compliance systems as part of their NMA application process. Now, staff works to ensure that each firm can meet FINRA's Standards of Admission, which can be found in FINRA Rule 1040. In addition to reviewing NMAs or New Membership Applications, we also review Continuing Membership Applications, or CMAs, for existing member firms who are planning material business changes.

03:10 - 03:20

Kaitlyn Kiernan: So, every firm in the industry has had a touch point with MAP at some point, whether it's just when they started or as the years have gone by and they've expanded their business?

03:21 - 03:54

Cindy Foster: That's right. Any material change at a firm such as a merger or a major asset change or a major change in their personnel or their business activities, those firms must come back to MAP through a CMA application to have staff evaluate those changes to ensure that they can continue to engage in the industry and that they can meet FINRA's standards as it relates to their regulatory compliance, operational and financial obligations.

03:55 - 04:01

Kaitlyn Kiernan: You are in the middle of making changes to the MAP program structure. Why the changes?

04:01 - 04:35

Cindy Foster: Well, for a couple of reasons. We really wanted it to become more efficient and effective in terms of how we first engage with our member firms, how we evaluate applications and the information that's provided to us through the Membership Application Program. But to put it succinctly, we really wanted to take a good look at our program, our workflow, our processes, our technologies to ensure that we're working as effectively and efficiently as possible.

04:36 - 04:40

Kaitlyn Kiernan: And what are you hoping to achieve through the transformation of the MAP program?

04:41 - 05:08

Cindy Foster: A more streamlined process, not only for our firms, but also for our staff and the examiners that do the work. Whether it's an NMA or CMA, we want to make sure that we are really focused on issues and risk and that we are working within FINRA and with member firms to address those issues and risk as early as possible in the process.

05:09 - 05:15

Kaitlyn Kiernan: And are there any big pain points that you're hoping to address that you can point to?

05:16 - 08:00

Cindy Foster: I would say that first of all we want firms to be as prepared as possible when they enter into the application process. Today, in many instances, firms will file whether it's a New Membership Application or Continuing Membership Application, and there might be issues with the application. It may be incomplete. They haven't thoroughly described or detailed their business activities, their written supervisory procedures. They haven't accurately or completely described their compliance program, their operational set up. And sometimes they're not really ready to demonstrate to us the technology or platforms that they're going to use for trading and other activities.

And what we really want to happen is to have this process as streamlined as possible for member firms. That means that when they come to us, they understand what their obligations are. They understand what they are required to provide to FINRA as part of the application process, and that that process is efficient internally. I want to make sure that our examiners understand the subject matter, that they have the right level of knowledge to not only assess and evaluate the applications, but that they can also engage with the firms efficiently and effectively in regard to any issues that might exist with the application, and that we can resolve those issues as quickly as possible.

I do want to say, for the most part, the process works very smoothly today, and our goal is to get firms approved just quickly as possible. We want firms to engage in the securities market. It's good for investors. However, there are times when we find that we are engaging in a back and forth with applicants regarding the details of their application. What we want to do is to minimize that back and forth. We want to have a process where firms can come to us and ask questions prior to filing the application. We want to make sure that they have the guidance that they need, whether that guidance is on FINRA.org or available to them through the FINRA Gateway. We want to make sure that they have the resources they need to completely understand the application process, what is required of them and that they can efficiently submit that information to us for evaluation.

08:01 - 08:09

Kaitlyn Kiernan: At a high level, what is changing to accomplish these goals of streamlining the process and making sure firms have these resources?

08:10 - 12:24

Cindy Foster: So, let me talk a little bit about the process and what we did. We started out with a period of research and analysis. We spent several months just evaluating and documenting the MAP workflow. We looked at every step in the process from the time that the applicant or the firm submits an application through the [FINRA] Gateway and everything that happens with that application along the complete process until such time that it's approved. After that research and analysis phase, we looked at the areas that we thought we can improve.

We categorized what we saw into several areas. The first was firm experience. The next one was the examiners experience, and then our technology. As it relates to the firm experience, we really wanted to make sure that we made the firm experience as streamlined, possible and as efficient as possible. So, we are looking at and evaluating how we can make submitting a form to FINRA intuitive and easy and as quick as possible.

The next thing was the examiners experience and one of the things that we noticed is that we really needed to beef up our training. So, we spent quite a bit of time creating a pretty robust, ongoing training and continuing education program for our examiners. The next thing we looked at was how we were structured and if we were structured in such a way that we were working efficiently with our colleagues and business partners in Member Supervision and across FINRA. And we also wanted to make sure that we were having effective communications with the member firms and that we were engaging with them in the most productive manner possible. And so, with that, we decided on a restructure.

In November of last year, we realigned it into four groups. And we also aligned with Risk Monitoring and Examinations. So as of November 1st, there is a triage group, a capital markets group, a retail group, and then a fourth group, diversified, trading and execution and carrying and clearing. The benefit of this new structure is that my examiners are looking at a limited set of applications. They are focused on capital markets, or they are focused on retail, or they're focused on diversified or carrying and clearing or trading and execution. When we have an examiner who's jumping from one business type to another, that wasn't efficient. It didn't allow them to really drill down and quickly build their subject matter expertise in certain business models and business activities.

So now we've aligned where our examiners specialize, and that has greatly improved our communication and collaboration with Risk Monitoring and Examinations. So now we're talking apples to apples, where my examiners are able to get up to speed much more quickly on a particular business type. They are able to identify potential risks or issues very early in the process. They're able to determine how to move forward with an application much more quickly than they may have been able to do so in the past. The conversations that they're having with Risk Monitoring and Examinations about these applications and other subject matter experts across the organizations are much more focused.

And, as you know, prospective members come back to us because they are changing their business model, they're expanding, and so they're also just building historical knowledge about those firms. So ideally, over time, that means that the application process is going to be more efficient, more streamlined, and we're going to get to that approval for those firms that can meet our regulatory obligations and compliance obligations much more quickly.

12:24 - 12:34

Kaitlyn Kiernan: That makes a lot of sense to align with the rest of the Member Supervision structure. But you mentioned there's also a MAP triage group. What will that group be doing?

12:35 - 14:38

Cindy Foster: Triage has existed for quite a while now. What we did is we refocused them a little bit and now they have three major responsibilities. The first one is that they're responsible for what we call early firm or pre-filing meetings. And that means that any firm who is thinking about becoming a FINRA member, you may not be sure yet, but you're thinking about it, and you have some questions, you can engage with MAP through our pre-filing or early firm meetings.

We also engage with current member firms who are looking to change their business, who may have some questions about the application process. I do want to point out that Risk Monitoring still remains the primary contact for current member firms, but if there are questions related to the application itself and completing that process, they can also contact us through our pre-filing program.

And firms in reaches two ways. They can contact us via email at [email protected] or at 212-858-4000, option five. Our goal as it relates to the pre-filing process is to ensure that firms understand what's required, that they aren't surprised by anything in the process, the New Membership Application or Continuing Membership Application process, and that they are aware of all the guidance and rules and any interpretive information that may impact their filing process.

The next thing that triage is responsible for is the application itself, so they will own that application until it becomes substantially complete. And then the third thing that triage is responsible for is ensuring that that application is assigned to the right firm group. So, if it's a capital markets firm that it is assigned to the appropriate group within our capital market's team.

14:39 - 14:55

Kaitlyn Kiernan: And we will link to the email and we'll also include the phone number you mentioned in the show notes for anyone looking for those. But with all those changes, how can firms and prospective firms expect to kind of feel and experience the changes?

14:56 - 16:03

Cindy Foster: The first thing they'll notice is they'll now have a resource through our early-firm and pre-filing meeting to come to us and ask questions about the process so they fully understand what is expected. I will expect that we will have fewer iterations of substantially incomplete applications, meaning that the application process will move a bit more quickly for firms. So over time, I think they will notice that our examiners really understand their business in detail, that the questions that we're asking are pertinent to their business plans and their business types.

Hopefully, they will find that we are spending our time on issues and gaps in the information, that our knowledge of not only FINRA rules but of the firm's business is enhanced. I hope that firms over time will begin to see that the approval process may happen a little bit more quickly. We're often hitting up against our mandated deadlines before making a decision on an application. We really want to change that.

16:04 - 16:16

Kaitlyn Kiernan: You mentioned that your team has already reorganized at the end of 2021, but you also mentioned other changes. Have they already taken place? What's the timeline for all of this?

16:17 - 17:11

Cindy Foster: It will be a multi-phase project. We've already done a lot in terms of enhancing our examiner training. We are also in the process of building out additional guidance and decision aids for firms, which will be coming soon. Another area of focus that we haven't quite started on yet really involves our taking a closer look at our technology, is improving the firm experience as it relates to actually submitting an application through the FINRA Gateway. We want to make the process of submitting an NMA or CMA to FINRA intuitive and as easy as possible for member firms. So that's something that we'll be looking at as part of a larger technology project that will take some time, and more details will come over the next several months.

17:12 - 17:34

Kaitlyn Kiernan: Great. So, it sounds like firms and prospective firms will already be able to experience some of the benefits of these changes. But there is more to come. If a prospective firm has already filed or soon plans to file a new membership application. Is this going to impact the process for them in any way? Is there any reason to hold off or they're good to move ahead?

17:35 - 18:02

Cindy Foster: Absolutely not. They should not delay. They should move ahead. I would say that for both prospective firms and current member firms, the process is going to be efficient. They're going to find their examiners are knowledgeable, that we're very focused on issues and risk, and that there will be fewer iterations of request letters going back and forth so we can get to approval.

18:03 - 18:19

Kaitlyn Kiernan: And you already mentioned where folks can go with questions about the application, like I said, we'll have the email and the phone number in the show notes. But how about feedback? Is there anywhere folks can go if they have feedback about the changes you're making that they want to share?

18:20 - 18:35

Cindy Foster: Absolutely. They can call that same number, 212-858-4000, option five. They can send their feedback to [email protected] They can reach out to anyone on the map team. And we are happy to hear your feedback.

18:36 - 19:12

Kaitlyn Kiernan: Well, it sounds like some exciting changes for, like you said, one of FINRA's essential business functions. So, thank you, Cindy, so much for joining us today to share more information about the MAP program transformation. For our listeners, if you don't already, be sure to subscribe to FINRA Unscripted wherever you listen to podcasts. And if you have ideas for future episodes or thoughts on today's episode, you can email us at [email protected] Today's episode was produced by me, Kaitlyn Kiernan, and engineered by John Williams. A special thanks to Jessica McCormick. That's it for today. Until next time.

19:12 – 19:18

Outro Music

19:18 - 19:45

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19:45 – 19:51

Music Fades Out

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