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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