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FINRA addresses compliance challenges in 2024 regulatory oversight report

On Behalf of | Jan 17, 2024 | FINRA Compliance

The Financial Industry Regulatory Authority addressed the main compliance challenges for firms in the year ahead in its 2024 Annual Regulatory Oversight Report, according to Financial Planning.

The report provides member firms with insights and observations from recent activities of FINRA’s regulatory operations to help them strengthen their compliance programs, the authority said.

“The report’s findings from across FINRA’s Member Supervision, Market Regulation and Enforcement programs can serve as a valuable resource for member firms,” said Greg Ruppert, Executive Vice President, Member Supervision at FINRA. “As our industry evolves, so do the compliance challenges faced by firms, which is why the report is so critical. Some of the topics covered will be familiar from past reports, updated for 2024, while others are new and represent emerging risks and evolving trends that are of growing importance as we look ahead.”

One major concern for the authority is the area of cybersecurity. FINRA said it has observed an increase in the variety, frequency and sophistication of certain cybersecurity incidents, including the establishment of imposter websites, insider threats, ransomware and cybersecurity events at critical vendors.  The authority said it has provided guidance to firms for identifying, preventing and mitigating incidents through its Cybersecurity Topic Page and its new Industry Risks and Threats Resource page.

Ransomware attacks have reportedly been rising sharply over the past year, said Omer Meisel, Executive Vice President of FINRA’s National Cause and Financial Crime Detection Program. “And the most heavily targeted industry now is the financial sector, having overtaken the health care sector,” Meisel said on FINRA’s recent Unscripted podcast. “So from my perspective, the cyber threat remains one of if not the top threat to the financial industry.”

Other areas covered in the regulatory report include:

-Crypto Asset Developments. The report provides considerations for firms that may want to account for crypto asset-related risks, and guidance for those who may engage in crypto asset-related activities.
-Anti-Money Laundering (AML), Fraud and Sanctions. FINRA member firms are required to develop and implement a written AML program that is approved in writing by senior management and is designed to achieve and monitor compliance with the Bank Secrecy Act and its implementing regulations.
-Reg BI and Form CRS. FINRA said it has been examining firms’ implementation of Reg BI and Form CRS obligations throughout 2021-2023 and said firms continue to violate Reg BI by recommending complex and illiquid products that are “inconsistent” with clients’ investment profiles that exceed preset concentration limits.
-Consolidated Audit Trail (CAT). FINRA noted that it continues to evaluate member firms that receive or originate orders in National Market System stocks, OTC equity securities and listed options for compliance with CAT Rules.

The attorneys at Lewitas Hyman regularly monitor SEC, FINRA and other self-regulatory organizations’ rule-making activities to help ensure that our clients are aware of any new policies, while assisting them in implementing any recommended changes. Our clients include broker-dealers, RIAs, banks, investment companies and hedge funds, along with registered representatives and other individuals participating in the securities industry.  Should you be in need of experienced counsel regarding a matter involving a regulatory agency, please contact Lewitas Hyman at (888) 655-6002 or through our online contact form.