FINRA’s 2019 Risk Monitoring and Exam Priorities
FINRA announced the 2019 Risk Monitoring and Exam Priorities on Tuesday, January 22, 2019. While the release contained many of the now stalwart topics that FINRA continues to examine every year, such as cybersecurity and suitability, there were new entries that firms would be wise to review before their next visit from the exam staff. Of note are the following areas from FINRA.
Supervision of Digital Assets Business
According to FINRA, some firms have expressed interest in participating in activities related to digital assets, and FINRA encourages firms to notify FINRA if they plan to engage in such activities, even where a membership application is not required.
Online Distribution Platforms
FINRA stated that firms are increasingly involved in the distribution of securities through online platforms in reliance on Rule 506(c) of Regulation D and Regulation A under the Securities Act. FINRA is concerned that member firms believe they are not selling or recommending securities when involved with online distribution platforms despite evidence to the contrary, including handling customer accounts and funds, or receiving transaction-based compensation. The exam staff will evaluate how firms conduct their reasonable basis and customer-specific suitability analyses, supervise communications with the public, and meet AML requirements.
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