FINRA: Priorities in 2014

FINRALast week, FINRA hosted a webinar outlining its regulatory priorities for 2014. Taking part in the webinar were FINRA’s CEO Rick Ketchum, the Executive Vice President of Regulatory Operations, Susan Axelrod, the Chief Legal Officer, Bob Colby, and the Senior Vice Present of Member Relations Chip Jones, who moderated the panel. Each participant answered questions and made a closing remark about FINRA’s 2014 regulatory priorities. Some of the priorities and topics discussed were:

  • Board Approves Rebates: FINRA’s Board recently approved a minimum rebate of $1200 to member firms. Firms will also receive an additional rebate based on their pro-rated share of regulatory fees paid to FINRA.
  • Recruitment Compensation Proposal: FINRA recently submitted a draft of its recruitment proposal to the SEC. During his comments, Ketchum stated that the purpose of the proposal is to require firms to disclose fees that clients should be considering when making investment decisions.
  • Fiduciary Duty: Participants also discussed the DOL’s attempt to re-define the definition of fiduciary; Ketchum said he hopes the DOL collaborates and creates a coherent response with the SEC and added that FINRA is in regular communication with the DOL.
  • Supervision Rule: A draft of changes to FINRA’s supervision rule has been filed with the SEC for final approval. Participants speculated the rule has not been approved yet because the SEC Commissioners need more time to analyze the proposal. The SEC has received more comment letters, which the participants asserted supported the changes.
  • Suitability Rule: FINRA has released guidance and a webinar on its new suitability rule which has been in effect for over a year. The FINRA participants explained that most firms have done the “right thing” with respect to suitability.
  • Social Media: There was a robust discussion regarding social media compliance laws in many states. Speakers said that FINRA currently has no plan to issue additional guidance on social media and is not seeing many issues in exams. Participants stated that each piece of social media is a record to the SEC and FINRA and therefore firms must maintain and review them. Colby noted social media legislation in states without an industry carve-out prevents adequate supervision and that FINRA is working with NASAA to get appropriate exemptions.

Priorities in 2014
At the conclusion of the webinar, each speaker stated what they believed would be included in FINRA’s priorities in 2014:

  • Ketchum: Continuing reinvention of FINRA’s exam program, as a focus on risk analytics and an effort to identify new and emerging regulatory issues; market regulation issues; and the development of the consolidated audit trail.
  • Axelrod: Creating an effective and efficient exam program, closer collaboration with FINRA’s Enforcement Department and a focus on holding individual accountable. She also said FINRA should identify information that can provide to firms to help them evaluate and improve their controls.
  • Colby: Reducing the burden on firms and strengthening relationships with banking agencies.

This was just a quick overview of the webinar. We will be examining several of these issues in more detail and discussing how they will affect advisors in the new year, so stay tuned! Enjoy your holidays from all of us at FSI and happy early New Year!


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