The brokerage industry’s chief regulator said Tuesday that its examiners will spend more time on “open-ended thematic reviews” that can identify where controls on financial risks break down.
Ketchum said FINRA had added 20 coordinators to its district staff, for a total of 90 district staff dedicated to the surveillance function. The goal: “a much more in-depth understanding of your business and how it's changing from the standpoint of business model, products and market events.”
FINRA, he said, is using “ both paper and electronic means to verify that customer assets exist” and are being held safely for customers to get ahold of, when needed.
FINRA has drafted a supplementary income statement schedule that will provide it with “a more informed understanding of the drivers” of a given brokerage business. Which means exams can “focus on the areas where you are earning your revenues.”
The broader data collection will expand over the next two to three years, so FINRA can develop profiles of firms that can be subjected to risk and compliance scenarios and analyzed.
“These procedures will enable our examiners to be more effective when it comes to identifying the issues that deserve their attention,” he said. “Our examiners will devote more time to understanding risks and how well they are managed or mitigated. The new examination technology we are developing will place greater emphasis on open-ended thematic reviews that require a more complete understanding of your business and the areas that are vulnerable to breakdowns in controls.”