FINRA Announces Revamped Examination and Risk Monitoring Program

FINRA has consolidated its three examination programs into a single program, a process that started in October 2018. As part of this consolidation, on December 12, 2019 FINRA announced the senior leadership team under the new examination and risk monitoring structure within the organization. The goal of the reorganization is to drive more effective risk monitoring by better identifying industry trends, promoting more examination consistency, eliminating duplication of examination efforts and creating a single point of accountability for the exams.

Going forward, all FINRA member firms will fall into one of five business model categories:

  • Retail
  • Capital Markets
  • Carrying and Clearing
  • Trading and Execution
  • Diversified

Each of these categories will consist of several sub-groups to more precisely categorize firms with similar business models and activities. Each category is headed by a senior leader and each firm will be assigned a single point of accountability, with the leader having ultimate responsibility for the ongoing risk monitoring, risk assessment, planning and scoping of examinations tailored to the risks of a firm’s business activities. FINRA has started notifying each member firm of its single point of accountability and its new risk monitoring teams. This new structure will be implemented as part of FINRA’s 2020 examination program.

As previously announced by FINRA, exams conducted pursuant to FINRA’s Regulatory Service Agreements (RSAs) with exchange member firms will be performed by a separate, specialized unit housed in FINRA’s Market Regulation Department to ensure consistency across RSA exams, provide dedicated resources to RSA-specific rules and trading, and promote economies of scale for RSA client work. Market Regulation will also have primary responsibility for executing exams for the Trading and Execution firm grouping, working in close coordination with the consolidated FINRA Examination and Risk Monitoring team.

The senior leadership team consists of:

  • Tom Nelli, Senior Vice President Will lead the teams responsible for executing the examinations, setting standards across the firm groupings, and quality assurance testing.
  • Ornella Bergeron, Senior Vice President Will lead the Single Point of Accountability and Risk Monitoring teams for the Carrying and Clearing and Diversified firm groups.
  • Bill St. Louis, Senior Vice President Will lead the Single Point of Accountability and Risk Monitoring teams for the Retail and Capital Markets firm groups.
  • Tim Thompson, Senior Vice President Will lead the Single Point of Accountability and Risk Monitoring teams for the Trading and Execution firm group.

Action items

First, if your FINRA coordinator has not yet contacted your firm, consider reaching out to discuss the new integrated examination program and how it will impact your firm. Second, review the many tools and checklists available on FINRA’s website to determine which ones can improve your firm’s compliance, supervisory and risk monitoring programs. Finally, keep an eye out for FINRA’s examination priorities letter, expected in January 2020, and if you haven’t yet reviewed FINRA’s examination priorities letter for 2019, please do so ASAP, and identify any topics that are applicable to your firm’s business model and revisit your firm’s oversight in these areas.

If you need more help, CSS providers broker-dealer services to assist you in meeting your compliance obligations. Contact us for more.

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