Thus, it will not come as a surprise when one learns. The fact that a significant number of FINRA compliance rules are about IT. It is essential for delivering today’s financial services despite the risks involve in this sector. Businesses today are playing a dual battle of getting the IT structure right and dealing with the rules. From numerous regulatory bodies including FINRA consulting. To avoid the complicatedness of having to deal with both IT and the FINRA rules, many of them decide to outsource their IT provision.
Even though brokers and brokerage firms have been doing everything possible to get it right from the word go. FINRA compliance and FINRA audits are not easy and this can at times prove stressful. No doubt delegating some of these responsibilities to a managed IT services provider will go a long way toward helping brokerage firms. Such as yours obtain a better level of FINRA compliance, all the while shedding some grey hairs and migraines.
Who Must Register with FINRA?
All the firms and their employees are required to register with FINRA in case they are involved in the securities business.
They were intended for investors’ protection and information, fraud and malpractice identification, equities market oversight, and their integrity maintenance.
FINRA is an SRO or self-regulatory organization, a Washington, DC-based non-profit, non-governmental organization created by the US Congress. To ensure that the industry of broker-dealers operates on the principles of fairness and honesty to the American investors.
The organization has received legal authority over the financial securities industry. Especially the NYSE and it will and has the resources to be as inevitable as the Grim Reaper or taxes. FINRA Consulting also has the authority to enforce compliance with its rules as well as stop brokers that are involved in violation of its rules.
FINRA is indeed the ‘hero of the hour’ but if you do not align yourself to obtain compliance. With the FINRA rules, they can cause a lot of mischief.
What is FINRA Compliance?
FINRA’s numerous rules dictate compliance, hence the goal is to achieve this compliance.
FINRA oversees about 4,200 registered broker-dealers that in turn have 63,000 registered reps. It must be noted that financial brokers are required to register, be licensed, qualified, and meet their prescribe continuing education. By FINRA rules, FINRA’s financial examiners physically visit the brokers and brokerage firms daily to conduct inspections. To ensure that they are strictly adhering to, every single day, the ones that are set out by FINRA.
Examiners direct all their resources toward fields that present potential fiscal threats to investors as well as the markets. With this in mind, they are assertively relentless (imagine the Spanish Inquisition’s member, who is also a forensic accountant, and you will be almost there).
FINRA examiners look into customer’s complaints and unusual behavior. While they also review dozens of thousands of advertisements and communications of brokers-representatives. Every year to ensure that financial information provide is correct and cannot mislead an investor.
It is worth mentioning here that FINRA and other such compliance standards can without doubt raise your cybersecurity. But do not forget, that there is a difference between compliance and real security.
Breaching FINRA Compliance Requirements
Investor protection in the United States and the preservation of America’s rod and integrity of its securities. Markets are a paramount responsibility hence violating the financial compliance standards is prosecute with serious consequences.
FINRA Consulting completed 1,397 disciplinary cases against brokerage firms and Brokers in 2014 fined $134 million and also collected $32 million for restitution in the same year 3 million.
Fines rose to $173 Laptop theft was at 8 million in 2015 and in 2017 only one firm. Red River Securities was attacked and lost $24. 6 million in penalties, although perhaps it could have been worse because FINRA also has the power to expel brokerage firms and suspend and bar brokers. Making it not only actionable under state law but also, more serious. Under federal law for them to sell securities.
The Juggling Act of Serving Clients and Managing FINRA Compliance
As to why most FINRA compliance rules relate to IT, it is not very difficult to comprehend. Technology is vital to provide the kind of financial services that the new generation demands. When businesses are under pressure to get it right in two critical areas. The technology platform that supports today’s business and the rules and regulations posed by a multitude of regulators. Together with FINRA, many choose to outsource their IT needs to a specialist provider.
