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FINRA Speaks To Small Firms

Yesterday I had the pleasure of attending FINRA's 2009 Small Firm Conference in Chicago, IL. The event was well-attended; the speakers were excellent; and there were many good questions from the audience. As you can imagine, all of this made for a worthwhile event as current "hot button" issues were discussed and attendees were given an in depth look at what to expect when FINRA shows up at your doorstep for an examination. Four sets of Panels comprised of regulators and member firm compliance personnel and senior management spoke on various topics including "Interacting with Regulators/Exam Priorities, Consumer Data Protection and Privacy, FINRA Rule Updates, and Ask FINRA Staff."

Notably, a major theme carried throughout the day by the regulators and echoed by several member firms was that too often firms view regulators as obstructionist or "the enemy," which is simply not the case. Regulators deserve the courtesy and respect member firms show their customers and visa versa. A "best practice" employed by one member, which seemed to resonate with regulators and other attendees, was preparing ahead of time by making the requested disclosures prior to the exam, and then having the person who will primarily be interfacing with the regulators during the exam clear out his or her calendar for the next 7-10 days (or as best as possible) and timely respond to regulators when they are in the office. An end result of this is that there may be fewer "open issues" at the end of the exam if regulators are provided the information they need while they are in the office, which moves the ball forward for everyone. Obviously, having one person clear out his or schedule can be a major undertaking, but the short term pain of doing so may prove less disruptive to firm business in the long run.

A related theme carried throughout the day was that regulators and member firms should have ongoing dialogue before, during and after an examination. As one regulator mentioned, there really should be no surprises at the exit interview if the firm and examiners have been communicating throughout the process. To this end, a best practice shared by a member firm in attendance yesterday was that the first time you interact with the regulators should not be at the start of an examination. Instead, take time to get to know the examiner in your district office and give them a sense of your business, as this will not only help them to tailor the exam to your firm, but will also give you an insight as to what they are looking and how you can best prepare for the exam. Then, during the exam, work with the examining team to set up a periodic time, maybe a Monday morning meeting, to discuss how things are going, thoughts they have at that point in the process, and what you can do to facilitate the exam. For individuals that have not been through an exam before, FINRA has made available at its website, finra.org, web/podcasts which you can watch and that will take you step by step through the examination process.

A final takeaway from the conference is that member firms should get involved on various committees. This is your opportunity to interact with regulators and continue building relations, and, as one attendee put it, "this is your opportunity to help shape policy rather than be shaped by it." I couldn't agree more.

Full post as published by OverRegd - Securities Regulation and Litigation Blog on July 17, 2009 (boomark / email).