Compliance Newsflash – December 13, 2017

December 13, 2017

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FINRA Releases Report on FINRA Examination Findings
On December 8, 2017, Lexology.com reported that the Financial Industry Regulatory Authority (FINRA) released a summary of findings from its examinations of broker-dealers (Summary Report). As part of FINRA’s mission of investor protection and market integrity, FINRA conducts regular examinations of its broker-dealer members, with each broker-dealer being examined at least once every four years. FINRA prepares a report-which is only available to the examined FINRA member-based upon the examination findings, and the members are required to address issues identified in this report. FINRA issued the Summary Report in response to member requests that FINRA make available an anonymous summary of observations from the examination program, so that members can further improve their compliance functions based upon the experiences of other members, and better anticipate and address potential areas of concern before their own examinations occur. The Summary Report contains selected observations from recent examinations that FINRA considers worth highlighting due to their potential impact on investors and markets or the frequency with which they occur.
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Roadmap to an Effective Annual Review
On December 8, 2017, Program on Corporate Compliance and Enforcement at NYU School of Law reported that as the year ends, SEC registered investment advisers to private funds start considering how to assess their firm’s compliance culture. The Advisers Act of 1940 requires a formal annual review of the adequacy of “written policies and procedures reasonably designed to prevent violation of securities laws.” In other words, every year Chief Compliance Officers ask themselves how they can actually demonstrate their effectiveness. Rather than viewing this process as a comprehensive narrative report identifying all deficiencies, perhaps a more useful construct is to think of the annual review as a way of collating and assessing activity throughout the year. Paradoxically, assembling information used throughout the year makes the process easier than attempting a comprehensive one-shot evaluation. Effective annual reviews are more like a movie than a photograph.
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