Conquering Current Compliance Challenges
June 12, 2019 | 2:00 - 2:30 PM EST

Conquering Current Compliance Challenges
Recorded: May 15, 2019 
Includes: Best Practices, Key Regulatory Issues and Compliance Tips
Includes: 23 Best Practices, 5 Peer-tested tools and 15 No Action Letters

Cybersecurity Strategies to Ensure SEC Compliance, 2nd Edition
Includes: 24 Best Practices, 16 Tools, 4 Risk Alerts and IM Guidance

FINRA and the SEC have long been interested in the supervision of branch offices and that interest is now even more heightened.  In its 2015 Exam Priorities letter, the SEC stated that it will focus on registered entities’ supervision of registered reps and financial adviser reps in branch offices, including using data analytics to identify branches that may be deviating from compliance practices of the firm’s home office. 
FINRA’s new supervision rules (FINRA rules 3110, 3120, 3150 and 3170) also kicked in on Dec. 1, 2014.  Among other things, the new rules modify requirements relating to supervising “offices of supervisory jurisdiction” (OSJ) and inspecting non-branch offices, and managing conflicts of interest in a firm’s supervisory system. 
Of course, firms must register each of their branch offices with FINRA, the NYSE and states requiring branch registration and indicate whether a branch office is a FINRA OSJ or a non-OSJ branch.  An OSJ branch must have at least one on-site supervisor who is a qualified and registered principal with the firm. 

Timing of inspections

FINRA has stated that the branch inspection process is a critical component of a comprehensive risk management program.  Broker-dealers need to ensure they are following the rules to conduct periodic branch inspections.  The type of office will dictate the required frequency of the inspection—annually for OSJ’s and non-OSJ offices supervising non-branch locations, triennial inspections for non-supervisory branch offices and  periodically for non-branch offices.
The regulators have reiterated the requirement that firms continuously monitor their branch offices for changes in “overall business, products, people and practices.”  They have also expressed the need for firms to inspect more frequently and intently offices that are perceived to have greater risk.
Broker-dealers failing to conduct a comprehensive branch self-inspection program could expect a visit and potential disciplinary action from either FINRA or the SEC’s Office of Compliance Inspections and Examinations. 

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