Receive our daily newsletter

FINRA Identifies 2019 Risk Monitoring and Examination Priorities's picture
Commentary by Mark Highman

In its 2019 Risk Monitoring and Examination Priorities Letter, FINRA outlined key areas of focus for 2019, including:

  • Online Distribution Platforms. FINRA will assess how firms are meeting their regulatory requirements when participating in online distributions of securities.
  • Fixed Income Mark-Up Disclosure. FINRA will assess whether firms are complying with their disclosure requirements for mark-ups/mark-downs on fixed income securities transactions with retail customers.
  • Regulatory Technology. FINRA will assess how firms are utilizing regulatory technology tools and addressing related risks, including supervisory issues, management of third-party vendors, protection of customer information and cybersecurity.
  • Suitability. FINRA will address quantitative suitability (e.g., excessive trading in customer accounts), excessive concentration of customer accounts in illiquid securities, failing to align securities recommendations with a customer's investment time horizon, and sales of complex products.
  • Senior Investors. FINRA will continue to focus on how firms are protecting senior investors from fraud, abusive sales tactics and financial exploitation.
  • Outside Business Activities and Private Securities Transactions. FINRA will assess firms' control over personnel engaging in capital-raising activities outside their employment for entities in which employees have an interest, particularly where those entities use names that may be confused with established issuers.
  • Supervision of Digital Assets Business. FINRA will assess whether firms that conduct transactions in digital assets are determining whether the products are securities, and if so, whether the firms are complying with applicable regulatory requirements.
  • AML. FINRA will assess whether firms are complying with FinCEN's Customer Due Diligence (CDD) rule that went into effect on May 11, 2018.
  • Market Risks. FINRA will focus on various trading requirements, including best execution, compliance with the Market Access Rule (Exchange Act Rule 15c3-5), short sale and short tender requirements.
  • Financial Risks. FINRA will focus on credit risks, funding and liquidity issues.


This year's letter focuses on "materially new priorities" and aspects of regular areas of examination that FINRA has not addressed in prior letters. This year's letter was expanded to address FINRA's areas of focus for risk monitoring as well as examinations. Some of the topics included in the 2019 letter reflect recent regulatory developments (e.g., FinCEN's new CDD Rule and FINRA's new disclosure requirements on fixed income securities, which both went into effect in 2018). Others topics reflect issues with developing technologies (e.g., RegTech and cybersecurity) and developing products (e.g., virtual currency transactions). In addition to the topics addressed in the FINRA letter, firms should review topics addressed in FINRA's December 2018 Examination Findings Report and the SEC's Office of Compliance Inspections and Examinations (OCIE) 2019 Examination Priorities.

Email me about this

Related Articles