Robo-advisors, fixed-income disclosure and sales practices are among the key areas of focus for the Financial Industry Regulatory Authority’s (FINRA) compliance exams in 2019, the U.S. self-regulatory organization (SRO) announced Tuesday.
In a letter setting out its exam priorities for the coming year, FINRA highlights both emerging and ongoing issues. Among emerging issues, the SRO points to the growth in online securities distribution.
Specifically, FINRA is concerned that some firms claim that they are not selling or recommending securities through their involvement with online distribution platforms, the letter states, “despite evidence to the contrary, including handling customer accounts and funds, or receiving transaction-based compensation.”
Regarding online distribution, FINRA says that it will look at a variety of issues including firms’ compliance with suitability requirements, the risk of undisclosed compensation arrangements, and the quality of product disclosure, among other things.
Other emerging issues identified in the letter as areas of focus in 2019 are: 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.
In addition, FINRA will continue to review for firms’ compliance in important areas of focus identified in prior years, including sales practice risks; hiring and supervision of associated persons with a problematic regulatory history; cybersecurity; and fraud, insider trading and manipulation across markets and products.
“While we will continue to review and examine for longstanding priorities discussed in greater detail in past letters, we agree with the suggestion from many of our member firms that a sharper focus on emerging issues will help them better determine whether those issues are relevant to their businesses and how they should be addressed,” says Robert Cook, FINRA CEO, in a statement.