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2019 Risk Monitoring and Examination Priorities Letter

January 23, 2019
Volume 4

  • Notices

Education and Compliance Programs

Exceptional market volatility generated an unprecedented amount of processing volume for FINRA in 2018: 66.7 billion electronic records per day, an 87.4 percent increase over the average daily volume in 2017. FINRA’s pioneering cloud strategy allowed it to handle the record-setting volume smoothly while continuing to perform vigorous regulatory oversight of securities trading.

Effective immediately, FINRA is automating the clearing agreement submission process. Firms no longer need to submit agreements by email. The automated form is available on the Firm Gateway (select the Forms & Filings tab, then select the “Carrying Agreements” form from the list). Note: Each firm’s SAA must provide entitlement to the appropriate firm contacts that will be responsible for submitting the form (as applicable). Please contact your Regulatory Coordinator if you have any questions regarding this process.

On January 26, 2019, FINRA will add a new feature in the new CRD system that allows firm users to query and view their firm’s associated individuals. FINRA will systematically entitle broker-dealer classic CRD users and administrators as appropriate to this new CRD feature. Visit the Transforming CRD page for complete information.

Firms are required to complete an annual verification of their contact information within the first 17 business days of each calendar year. The deadline for firms to complete the annual verification in the FINRA Contact System (FCS) is January 25, 2019. If you need instructions on performing the review, see the FCS Annual Review Guide.

Rule 4517 requires firms to update designated contact information promptly upon any material change, verify such information annually and comply promptly with any request for such information via FCS.

FINRA released its 2019 Risk Monitoring and Examination Priorities Letter, highlighting new priorities as well as identifying areas of ongoing concern that FINRA will continue to review in the coming year. Among the emerging issues identified in the letter as areas of focus in 2019 are online distribution platforms; firms’ compliance with FinCEN’s Customer Due Diligence (CDD) rule; and firms’ compliance with their mark-up or mark-down disclosure obligations on fixed income transactions with customers. Read the letter and view the podcast:


TRACE Reporting of OTC Transactions in Listed Bonds

FINRA issued Trade Reporting Notice 1/22/19 to remind members of their TRACE reporting obligations with regard to over-the-counter transactions in TRACE-eligible securities that may also be listed on an exchange.

October 2018 Supplement to the Options Disclosure Document

The SEC approved the October 2018 supplement to the Options Disclosure Document (ODD). The ODD contains general disclosures on the characteristics and risks of trading standardized options. The October 2018 supplement (i) amends and restates in its entirety the April 2015 Supplement, which accommodated foreign index options and certain implied volatility index options; (ii) provides additional contract adjustment disclosures regarding the determination of contract adjustments by OCC rather than adjustment panels and the manner in which certain adjustments may affect an option’s value; and (iii) reflects T+2 settlement. As with other supplements to the ODD, this should be read in conjunction with the current ODD, Characteristics and Risks of Standardized Options. See Information Notice 1/17/19.

 Education and Compliance Programs

Due to the partial government shutdown, the Compliance Outreach Program for Municipal Advisors, scheduled for February 7, 2019 has been postponed. More details to come on the new date for this event.

The CTCI migration conference call has been re-scheduled to Wednesday, Jan. 30, 2019, 2-3 p.m. Eastern Time, to discuss the upcoming migration. Effective Feb. 3, 2020, FIX will be the only protocol supported for reporting trades to FINRA's TRACE and ORF platforms.

Register for the call to learn:

  • The steps that firms will need to take to successfully complete the migration;
  • Where to find documentation;
  • About network and application testing for direct connections as well as for firms reporting via a service bureau; and
  • Where to get support.

The call will be in listen-only mode. Questions may be submitted before or during the call to [email protected].

Please note: registration is required for all participants, including those who had registered for the call that was postponed. Signing up to participate is quick and easy. There are a limited number of lines available for this call. Please register as soon as possible and plan to share a phone line with others at your firm to help FINRA maximize participation.

Registration is now open for the 2019 FINRA Diversity Summit, which takes place Tuesday, April 2 in New York City. This free one-day program provides a forum for business leaders, diversity practitioners and human resource professionals in the financial services industry to explore a variety of corporate practices, strategies, and outreach efforts intended to leverage the benefits of building sustainable diversity and inclusion programs.

Space is limited and available on a first-come, first-served basis, with a preference given to those employed or associated with a FINRA member broker-dealer firm. Register soon to reserve your seat.

Register early for the Annual Conference, which takes place May 15-17, 2019, in Washington, DC. This year's conference features more than 50 sessions and five session tracks geared towards various business models and firm sizes. Join us to hear valuable insights on today’s most timely topics, featuring a keynote address from FINRA President and CEO Robert Cook and Author of The Pursuit of Happyness Chris Gardner.

Topics include:

  • Anti-Money Laundering (AML)
  • FinTech
  • Fixed Income
  • Cybersecurity
  • And much more

Reduced rates are available for the first 500 in-person registrants before March 29, 2019. Register today.

Register today for the 2019 FINRA Institute at Georgetown Certified Regulatory and Compliance Professional (CRCP)® program— comprised of two weeklong residential courses, which are delivered at Georgetown University's McDonough School of Business in Washington, DC. This program provides an executive educational experience that covers the theory and practical application of securities laws and regulation through intensive instruction, discussion and case studies.

  • Week I • July 21 – 26, 2019
  • Week II • November 17 – 22, 2019

Watch our latest video to learn more about the CRCP® program and get answers to the most frequently asked questions about the program. Visit FINRA's website for additional details and registration information.

Mark your calendar as FINRA’s Small Firm Conference returns October 23 – 24, 2019 in Santa Monica, CA. This conference features in-depth discussion on small firms’ practices and tips for complying with FINRA rules.

Discounted rates available—register early to secure your seat


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