Avoiding Compliance Surprises in Risk-Based FINRA Cycle Exams


National Society of Compliance Professionals (NSCP) Image: nscp.org
National Society of Compliance Professionals (NSCP)
Image: nscp.org

As head of the Securities Practice Group at Freeman, Freeman and Smiley, LLP, attorney Sylvia Scott has also served on the National Society of Compliance Professionals (NSCP) faculty. In her work as attorney, Sylvia Scott has extensive experience with securities regulation and litigation from the perspective of brokers.

In a 2013 article for NSCP Currents, Ms. Scott provided advice to members of the broker-dealer community in preparing for SEC and Financial Industry Regulatory Authority (FINRA) exams. Particularly challenging are FINRA cycle exams that employ a risk-based approach that has taken the place of previous “one-size-fits-all” strategies.

Although this approach has been in place for a number of years, businesses of all sizes are often caught flat-footed when they find themselves subject to enforcement investigations. Companies are advised to plan well in advance for the eventuality of a FINRA exam and take steps to prevent adverse outcomes. This begins with playing “devil’s advocate” and identifying weak spots that need to be corrected.