RIA Compliance Blog
The Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) recently jointly issued a Risk Alert and a Regulatory Notice on broker-dealer branch office inspections designed to help securities industry firms better supervise their branch offices, as well as to underscore the importance of that supervision.
“An effective risk based branch office inspection program is an important component of a broker-dealer’s supervisory system and, when constructed and implemented reasonably, it can better protect investors and the firm’s own interest,” stated Stephen Luparello, Vice Chairman of FINRA.
The risk alert specifically makes the following recommendations to firms, including:
- Increasing the frequency of branch inspections, especially unannounced visits;
- Customizing examinations to branch activity based on risk assessments;
- Involving more senior personnel in exams;
- Insuring that examiners have no conflicts of interest; and
- Increasing supervision of certain offices based upon surveillance data and requiring corrective actions to address deficiencies noted.