FINRA highlighted key areas in which broker-dealers failed to establish and maintain adequate supervisory controls and compliance programs.
In a Report on Examination Findings, FINRA advised broker-dealers to:
- establish adequate supervisory systems to stop registered representatives from making unsuitable recommendations to retail customers;
- perform regular reviews of confirmations regarding fixed income mark-up disclosures;
- conduct reasonable due diligence for private placements; and
- implement systems to prevent registered representatives from abusing their authority to act on behalf of their customers.
Additionally, FINRA observed that some broker-dealers were struggling with implementing supervisory and compliance systems to address:
- anti-money laundering;
- net capital computation accuracy;
- liquidity risk management;
- segregation of client assets;
- unregistered staff operating in activities that require registration as operations professionals;
- confirmation disclosure requirements for transactions with customers in equity securities;
- registered representatives using a "doing business as" or "DBA" name;
- "their duty of best execution in equities, options and fixed income securities trading";
- compliance with TRACE reporting rules in institutional sales of fixed income securities; and
- mandatory market access controls.
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