The Financial Industry Regulatory Authority (“FINRA”) delivers audits and regulation services to the financial industry. As a Self-Regulatory Organization (“SRO”), FINRA works closely with the Securities and Exchange Commission and enforces securities regulations. When your firm is due for an exam, FINRA assigns a Regulatory Coordinator who works with an examination team to build a risk-based execution strategy focusing on areas that are material to your business. The team may conduct reviews for compliance with the Municipal Securities Rulemaking Board’s rules, and the rules of other exchanges for which FINRA conducts regulatory work. In the following article, we outline what you can expect and how to prepare yourself and your firm for FINRA examiners.
Annually, FINRA assesses your firm’s business activities by evaluating its risks. The results of these evaluations help determine whether your firm will receive an audit or “cycle examination” every one, two, three, or four years.
The investigation begins electronically through FINRA’s Firm Gateway portal. The investigation process includes a pre-site inspection of documents and an on-site inspection conducted by a FINRA team. FINRA initiates the process by sending a notice to your firm through the portal as many as 60 days prior to the on-site component, which details the investigation process, and specifically informs your firm when it should receive FINRA’s first document request. The information FINRA gathers from these documents prior to the on-site component allows FINRA to design an effective evaluation strategy tailored to your firm’s activities. FINRA then executes this evaluation strategy during the on-site examination.