A Look at FINRA’s 2016 Priorities Letter

Recently FINRA published its priorities letter for 2016. In the letter, FINRA addresses a number of focus areas for 2016, including surveillance, technology, outsourcing and firm culture.

Surveillance is a large topic to cover, but one of the key components FINRA continues to scrutinize is trade or market access surveillance. This is at the heart of any broker dealer business. Even in today’s digital-first world, most surveillance is done via spreadsheets, or – if your brokerage is fortunate enough -, expensive and monolithic solutions from vendors who’s target audience is the top 25 banks. To comply with FINRA’s standards and recharge their internal productivity, small and mid-sized brokerages need to rid themselves of spreadsheet nightmares and focus on their core business: trading. Firm58’s cloud-based Compliance & Surveillance solution is a cost-effective platform that lets broker-dealers quickly add and configure custom surveillance rules. We host the platform, eliminating the IT resource strain on your team.

That leads into FINRA’s technology and outsourcing focus areas:

“FINRA has observed shortcomings in firms’ management of their technology systems… FINRA is also seeing significant operational breakdowns at firms when there is a change from legacy to new compliance systems.”

As broker dealers shift from antiquated platforms to nimble, current solutions – and contract third party advisors to support their transformation – the potential for risk exposure and noncompliance is palpable. Firm58 helps take the burden off broker dealers by fully managing their market access surveillance systems and reducing the vulnerability of legacy systems.

Finally, FINRA wants to address culture at broker-dealers. This can be in the form of practices, attitudes and strategies that may harm the firm, market or its clients. One way to demonstrate that your brokerage is adopting a culture of best practices is by addressing trade surveillance in a more consistent, deliberate way. One of the five pillars FINRA plans to use when evaluating firm culture in 2016 is how proactively brokerages “identify risk and compliance events.” Investing in market trade surveillance tools and procedures proves that your firm is committed to compliance, possibly lessening the likelihood of a serious offense and penalty.