Brokerage firms should resist the urge to compromise compliance, even as they must weather the rough markets, cautions the U.S. Financial Industry Regulatory Authority (FINRA).
Speaking to an industry conference in New York today, Susan Axelrod, executive vice president member regulation sales practice at FINRA, cautioned firms against drastic cuts. “As firms consider their costs, decision makers may be tempted to consider cuts in the compliance area, to delay critical technology initiatives or to outsource key functions. But firms should remember that cutting too much now will likely cost more in the future,” she said.
Axelrod stressed that it is “imperative that firms maintain proactive and robust compliance systems”, and that those systems need periodic testing under various scenarios.
Additionally, she noted that FINRA plans to develop additional guidance for the industry on identifying and managing conflicts of interest.
She also stressed that it will continue to focus on suitability, particularly where vulnerable customers and complex products are concerned. “Product innovations are here to stay, so firms must understand the products they sell and particularly the implications when selling to retail clients,” she said.
And, she noted that FINRA expects cyber security to remain a regulatory focus for the foreseeable future as well.