A FINRA risk-based exam can be a harrowing experience for firms, especially if they are unprepared. But with the agency on track to complete 865 branch offices examinations this year, it’s important for firms to take steps that will limit problems.
There are several factors that drive the risk-assessment of a firm including its size, the nature of its business and the types of products sold, according to Susan Axelrod, executive vice president of regulatory operations at FINRA. “We’ll look at the disciplinary history of the employees at the firm. We’ll look at the trends in the arbitrational claims,” she added. Whistleblower tips and complaints can also lead to an audit.
Once a firm is selected to undergo the examination process, the best thing to do is be upfront and help the examiners as much as possible—including complying with information requests right away, setting up interviews with key supervisory personnel and arranging easy access to all the information the association requests.