Gift Guide for CCOs: Top Five FINRA Compliance Tools and Resources
The festive season is here. Are you looking for the perfect gift for the compliance professional in your life? Look no further. On this episode, Kayte Toczylowski, FINRA’s vice president of Member Relations and Education, joins us to share the top five FINRA tools and resources, or gifts, if you will, that you will want to make sure you are aware of and be sure to share with all of your colleagues.
Resources mentioned on this episode:
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00:01 - 00:18
Kaitlyn Kiernan: The festive season is here. Are you looking for the perfect gift for the compliance professional in your life? Well look no further. On this episode, we're going to walk through our list of the top five resources, or gifts, if you will, for all the compliance professionals in your life with FINRA's Head of Member Relations and Education.
00:28 - 01:21
Kaitlyn Kiernan: Welcome to FINRA Unscripted. I'm your host, Kaitlyn Kiernan. I'm pleased to welcome back to the show Kayte Toczylowski, Vice President of Member Relations and Education, for FINRA Unscripted's final episode of 2022. With the holidays upon us, today we'll be having a little bit of fun and providing a gift guide for the compliance professionals in your life. Kayte will share all of her favorite FINRA tools and resources, the ones you'll want to make sure that you're aware of and share with all of your colleagues. Now, Kayte, for many of our listeners, you need no introduction. As FINRA's Head of Member Relations and Education, you seem to be everywhere. You're at committee meetings, member roundtables, on the stage at our many conferences, and you have even guest hosted FINRA Unscripted before. But for those who may not be familiar with you, can you kick us off by introducing yourself and telling us about your role at FINRA?
01:22 - 03:20
Kayte Toczylowski: Thank you so much for having me back on Unscripted, Kaitlyn. I've been leading Member Relations and Education for a little over two years now, and I joined the team back in April of 2020. Before joining this team, I spent nine years within the examination program within Member Supervision, having served as an examiner, an examination manager and then rounding out my tenure there as an examination director in the Capital Markets and Investment Banking firm grouping. And then prior to FINRA, I actually spent eight years in the compliance department of a broker-dealer in Philadelphia. The majority of my time there was spent conducting branch examinations, so the experiences of both working in a compliance department and within FINRA's examination program give me such a well-rounded perspective to bring to my current role. Within my current role in Member Relations and Education, our primary objectives are to reach out to member firms and solicit and gather feedback, facilitate firm involvement in FINRA's policymaking process, which is such a critical and beneficial characteristic of effective self-regulation, and then we also work to develop educational and networking opportunities in collaboration with groups across FINRA to inform the industry about priorities, regulatory trends and initiatives, and then to also provide usable and useful compliance tools, our big topic today, for the firms to understand and implement FINRA's regulatory landscape. We regularly engage with firms in a variety of ways, both in-person and virtually, including, as you mentioned, committees, roundtables and other member meetings. And we have finally started to get back together in-person with firms with both our outreach meetings and our educational conferences. And it's just been incredible getting to meet with our membership in-person. This has been a challenging role, but definitely one that I truly enjoy.
03:21 - 03:53
Kaitlyn Kiernan: Definitely challenging to take on any new role in the midst of the pandemic, but especially one where you're trying to meet with and work with people across the country and across the industry. Now, let's get started with our list of favorite resources for firms and compliance staff, and I think we'll count it down today. In the number five spot, we have a package deal. We have FINRA's compliance tools. Kayte, what are some of the great compliance tools available for firms and where can they find them?
03:54 - 05:53
Kayte Toczylowski: We have an entire finra.org page dedicated to compliance tools. So, definitely start there for a whole library of all that FINRA has to offer you in this space. I do want to spend some time highlighting three resources that our listeners may not consider typical compliance tools. So, first, there's FINRA's Regulatory and Information Notices. These can be found on the Rules and Guidance page of finra.org. These Notices do so much more than just highlight rule changes. They also aim to provide current threats and issues that we're seeing, as well as provide effective practices so you can strengthen your supervisory procedures and controls ahead of any FINRA examination. Second, we have targeted examinations. And you can find all of FINRA's targeted examination letters on finra.org under the Guidance topic on the Rules and Guidance page. Some refer to these reviews as sweeps. They're the same thing. Even if your firm is not involved in the sweep or the targeted exam, these letters offer a great resource and a view into what FINRA is currently interested in. Use the questions within the exam letters to conduct a little self mini-audit on your firm. And lastly, I'd highlight the report on FINRA's Examination and Risk Monitoring Program. This can also be found on the Guidance page of finra.org. And not only does the report highlight key considerations for firms' compliance programs, but it also summarizes findings from recent exams. It outlines effective practices that FINRA has observed during its oversight, and it actually lists additional resources that might be helpful to your firm in reviewing your supervisory procedures and controls and fulfilling your compliance obligations. Now, FINRA's been adding this topic in this report since 2021. And if you haven't used it as a resource yet, definitely check it out.
05:54 - 06:15
Kaitlyn Kiernan: Great. And we'll link to all of those places in our show notes. I know a targeted review or sweeps page has just recently been updated with the results of a sweep and with a new sweep or targeted review announced just recently. So, definitely be sure to check that out. Are there any other new tools or updates that happened this year that are worth highlighting?
06:16 - 07:27
Kayte Toczylowski: Yes, there definitely are. We have a whole new suite of tools regarding new FINRA Rule 4111, which is regarding restricted firms. So, there are two new tools that help firms understand disclosure mapping and field definitions. And then we have a FINRA Gateway tool that allows a firm to run a report that shows whether your firm has met the preliminary criteria for identification, including the firm's preliminary identification metrics for being considered a restricted firm. We also have a new written supervisory procedure checklist for Funding Portal. And then we have a suite of new MAP tools, one regarding private placements, Funding Portals, organizational change and naming guidelines. And then our last new tool is the Core Cybersecurity Threats and Effective Controls for Small Firms. And then we updated the written supervisory procedure checklist for broker-dealers. And all of these new tools and the updated tools can be found on the Compliance Tools page on finra.org.
07:28 - 07:42
Kaitlyn Kiernan: Awesome. It's great to see that there's both these tools that are new for new rules. So, helping with compliance with new regulation, but also creating new tools to even help with some of the more longstanding rules to help with compliance there as well.
07:43 - 07:44
Kayte Toczylowski: That's right.
07:44 - 07:56
Kaitlyn Kiernan: So, now at number four, you have heard of Cyber Monday, but have you heard about FINRA's free Cyber Threat Briefing series? Kayte, can you tell us more about these?
07:56 - 08:20
Kayte Toczylowski: These sessions allow you to hear from FBI field office leaders and cyber investigators as they discuss real time threat intelligence and they provide local and regional FBI resources that are available to you. They're open to member firms only. And this bears repeating that they are completely free for you to attend.
08:22 - 08:25
Kaitlyn Kiernan: Awesome. And how can firms stay in the loop about upcoming briefings?
08:26 - 09:16
Kayte Toczylowski: So, when we hold a Threat Briefing, typically we try to engage the regional FBI field office with the firms in that geographic location. So, they're regionally based. If your firm is located in our targeted region, you'll receive an email letting you know about the threat briefing so you can register. We also update the Threat Briefing program page, which is on finra.org under Conferences and Events to alert firms to these Threat Briefings. You do not have to be in the region in which we're holding the briefing. So, make sure that you look at the Conferences and Events page frequently to see when the next one is happening. We also have recordings of the sessions that we've held previously. So, make sure that you check on those recordings if you either missed yours or are just curious what's going on in a different region.
09:16 - 09:32
Kaitlyn Kiernan: Now, I might find it intimidating to get to know an FBI agent. I think a lot of people might feel that they don't want to know law enforcement and they want to stay as far away as possible. But why is it important to develop the relationships with an FBI agent locally?
09:33 - 10:08
Kayte Toczylowski: You know, it's always so nice to have a standing relationship or at least know the contact information, be able to put a face to a name, before an incident arises. So, take advantage of the opportunity to get to know the faces and names of the individuals you may need to call during a really scary time for you and your firm. So, we find that this introduction helps alleviate any of that fear or label of, "Oh my goodness, I have to contact the FBI." Attend one of these threat briefing, get to know the people that you'd be contacting. That way, when an issue arises, you already know who to call.
10:09 - 10:17
Kaitlyn Kiernan: Awesome. So, we mentioned it a little bit at the beginning, but coming in at number three, we have in-person events.
10:17 - 10:17
Kayte Toczylowski: Yeah!
10:18 - 10:28
Kaitlyn Kiernan: So, we went a couple of years without them, but they are back. So, Kayte, after a few years of attending virtual conferences, what do you see as the benefit of attending in-person?
10:29 - 11:15
Kayte Toczylowski: So, as soon as we returned to in-person, I was reminded of all that we missed in a fully virtual environment. Meeting with someone in-person, shaking their hand, looking them in the eye, it provides such a stronger connection. Your conversation can be more real and really dive deeper into a topic when you're in-person. Virtual works great to provide information, don't get me wrong, it's such a great vehicle that we have. But in-person allows us to build relationships, build networks, and engage in very important organic conversations. The hallway conversations at our in-person meetings and events can sometimes be even more impactful than the content shared during the session.
11:16 - 11:24
Kaitlyn Kiernan: Yeah, I think even just sitting at a random table during lunch at a conference, you get to meet and talk with so many interesting people and develop great connections that way too.
11:25 - 11:25
Kayte Toczylowski: Exactly.
11:26 - 11:29
Kaitlyn Kiernan: Are there any particular upcoming events you'd want to flag?
11:30 - 11:59
Kayte Toczylowski: I do want to flag that it may seem far away right now, but it's going to be here before we know it, our 2023 annual conference registration is open. You can register now. I know many of you are finalizing your budgets for next year. Make sure you don't miss that event, especially if you weren't able to attend in-person the last couple of years. Take advantage of this opportunity to come meet people in-person and build those connections.
12:00 - 12:15
Kaitlyn Kiernan: I personally love that event every year, so I'm looking forward to it as well. Now at number two, we have FINRA's committees. Kayte, how do you see FINRA's committees serving as a resource for firms and compliance professionals?
12:16 - 12:55
Kayte Toczylowski: Committees are given recurring and routine access to so many of FINRA's senior leaders. And the committees can truly amplify member feedback, concerns and obstacles that you may be going through. Our FINRA committees, as I mentioned at the top of the call, are such a key element to having a robust self-regulatory organization. I encourage all of our listeners to check out all the different committees that we offer on finra.org and contact them. Let the committee members know what's on your mind that they can share that during the next scheduled meeting.
12:55 - 12:59
Kaitlyn Kiernan: And what kind of committees are there? Where can our listeners find them?
13:00 - 13:49
Kayte Toczylowski: So, there are actually 13 advisory committees at FINRA, four of which provide input and feedback on regulatory Board action items. So, really help to influence and provide feedback on potential rules here at FINRA. Those four are the Large Firm Advisory Committee, the Membership Committee, Small Firm Advisory Committee, and the Investor Issues Committee. Then there are five regional committees. These committees are elected for three-year terms and represent the various districts in each of FINRA's regions: North, New York, South, Midwest and West. You can check out all the committees on the Governance page, which is on finra.org, under the About FINRA section.
13:50 - 13:53
Kaitlyn Kiernan: And if someone wants to get involved, how could they do that?
13:54 - 14:53
Kayte Toczylowski: Definitely start by checking out the finra.org page that I just mentioned to review the depth and breadth of all of FINRA's different committees. There's many different subject matter committees in addition to the advisory committees and regional committees that I just noted. On the far right hand side of that page, you'll see a link to an Indication of Interest portal. Fill out that form to be considered. Be appointed to one of our many different advisory committees. Then in August and September of each year, FINRA issues an Election Notice to petition for people to run for various different openings on our Small Firm Advisory Committee and our regional committees. Be on the lookout for those Notices and petition to run. If you contact any of our current committee members, they'll tell you that is such a valuable resource, that it's such a fantastic experience and that they really gotten a lot out of serving as a committee member.
14:54 - 15:06
Kaitlyn Kiernan: Great. I love that there's a spectrum here. You can be as involved by indicating your interest as you want. Or you could just reach out to existing committee members to raise your concerns or share your views.
15:06 - 15:13
Kayte Toczylowski: Exactly. It's such a great way to get your feedback heard and brought up to some of FINRA's most senior leaders.
15:14 - 15:32
Kaitlyn Kiernan: So, now at number one, we have FINRA's risk monitoring analysts. This might be one of the most underutilized firm resources. Kayte, can you start out by reminding us what FINRA's Risk Monitoring Program does and the role of the risk monitoring analysts or RMA?
15:33 - 16:24
Kayte Toczylowski: So, if you've ever heard Gregg Ruppert, FINRA's Head of Member Supervision speak, you may recall the term, "left of boom." This means staying ahead of an issue and uncovering something before it blows up. This is the role of risk monitoring here at FINRA. They're here to understand the business and risks of your firm and serve as day to day contacts for you on any questions that may come up. The risk monitoring analysts are your first point of contact. You have a question, comment, feedback, or you need help identifying where to go? Call your risk monitoring analyst. These relationships are so beneficial for firms, but they are also so beneficial for us here at FINRA. They really serve as a way for us to identify emerging risks and surfacing key issues.
16:24 - 16:29
Kaitlyn Kiernan: Awesome. You don't want to be afraid of your risk monitoring analysts. They are there to be a resource.
16:30 - 17:41
Kayte Toczylowski: That's exactly right. They are such a fantastic resource for you. Since the Member Supervision program reorganized into firm groupings back in January 2020, these risk monitoring analysts have been focused on specific business models. So, if you have a question, it is very likely it's a question another one of their assigned firms has already asked them. They can share with you effective practices that they've heard from other firms and they can point you in the right direction. Now, they can't make business decisions for you or your firm, but they are there to provide and share resources that may make it a bit easier for you to make that decision. And then one other item to note here is beyond your risk monitoring analysts, each firm group is also assigned a senior director who has ultimate responsibility for all risk monitoring activity within the group. So, if you're still feeling like you need help, you can also reach out to the senior director. Like your risk monitoring analyst, they'll have a wider picture beyond just your firm of the issues facing firms in your firm grouping. So don't be afraid to call them. They're there as a resource and they're there to help.
17:42 - 17:56
Kaitlyn Kiernan: Awesome. So, I know I said that was number one, but we have a bonus resource just to wrap things up. FINRA's newly launched, Machine-Readable Rulebook. Kayte, what is this and how can this help industry compliance professionals?
17:57 - 19:59
Kayte Toczylowski: This is such a great bonus resource for us to highlight today. In October of 2022, FINRA announced through a special Notice the Machine-Readable Rulebook. The prototype is available now on finra.org underneath FINRA Rules. It's being referred to as FIRST, the FINRA Rulebook Search Tool. FINRA has been working to develop this Machine-Readable Rulebook to assist users to more readily analyze and search FINRA's Rules. And as part of this initiative, we've created an embedded taxonomy. And this is a fancy way of saying a method of classifying, categorizing, a hierarchy of key terms and concepts. This taxonomy has been associated with certain FINRA Rules, which then can make them more easily processed by a computer and then less time-consuming and costly for a firm's legal and compliance after review. Now, as a starting point, we've tagged the taxonomy terms that were developed, to forty FINRA Rules, and these Rules represent the most frequently viewed Rules. In addition, we are offering access to the taxonomy terms that have been tagged to these forty Rules through an application programming interface, or an API. And by launching this prototype, we're seeking feedback. We want to further development the taxonomy terms and the use and the design of the search tool, the API system, and any other potential benefits or challenges that might be associated with the overall experience. So, this special Notice that we put out in October also asks for firm feedback. We want to know how you're using it. We also reference potential paths forward and we request your comment on both how we're thinking about using this in the future and then your feedback on the user experience. So, I encourage all of you to go and explore this free resource and tool, review the Notice and send us your feedback.
20:00 - 20:52
Kaitlyn Kiernan: Awesome. And we'll link to all of that in our show notes in case you missed any of it. Kayte, thank you so much for joining me to walk through all of these great resources for our industry compliance professionals. I hope our listeners will share these resources with others that they work with and make the most of all that is available to them. That's it for today's episode and for us for 2022. We'll be taking a break for the rest of the holiday season, but we'll be back with new episodes in the New Year. Listeners, be sure to subscribe to FINRA Unscripted wherever you listen to podcasts to get notified when we're back with new episodes. If you have anything you'd like to hear from us and that you'd like us to dig into next year, you can email your ideas to [email protected] Today's episode was produced by me, Kaitlyn Kiernan, engineered by John Williams and coordinated by Hannah Krobock. Until next time.
20:58 - 21:25
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21:25 – 21:28
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