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FINRA plans at least 1,000 Reg B1 exams by end of 2023

On Behalf of | Mar 28, 2023 | FINRA Compliance

An executive with the Financial Industry Regulatory Authority provided an update on the authority’s plans for this year’s Regulation Best Interest exams, reports Financial Advisor.

Bill St. Louis, executive vice president and head of FINRA’s National Cause and Financial Crimes Detection Program, said FINRA intends to complete Reg B1 exams on at least 1,000 of its 3,300 member broker-dealers by the end of 2023.

The Securities and Exchange Commission adopted Reg B1 in June 2020, establishing a “best interest” standard of conduct for broker-dealers when making recommendations to their customers about securities transactions or investment strategies.

St. Louis made his comments at the Compliance and Legal Conference of the Securities Industry and Financial Markets Association. Also speaking at the SIFMA conference was Christopher Kelly, FINRA’s acting head of enforcement, who discussed the authority’s plans for stepped up enforcement of Reg B1 violations.

Kelly said that a number of firms who were initially given warnings about Reg B1 violations have yet to take remedial action, “so those will often result in referrals to enforcement.”

Until now FINRA has not been seeking enforcement actions for most Reg B1 violations, instead reporting them in industry-wide notices. But the authority did announce its first Reg B1 enforcement action in February. FINRA charged the Long Island Financial Group with failing to supervise and establish, maintain and enforce written policies and procedures. The firm paid a $35,000 fine, accepted a censure and will certify it has remedied the failures, but did not admit or deny guilt.

Kelly said the authority is looking into another possible enforcement action involving conflicts surrounding variable annuities.

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