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Over the past decade, we have witnessed tremendous change to firms, markets and regulation. Many changes have been positive. Firms have improved their review of new products by integrating business functions with independent perspectives, such as compliance and risk management, articulating standards, documenting decisions and monitoring product performance.
Firms have taken steps to better manage conflicts of interest by aligning compensation more closely with customer interests or through risk-adjusted compensation. The markets have become more transparent to retail investors with expanded trade report dissemination.
FINRA took steps to enhance transparency in "dark pool" trading through the publication of reports on alternative trading systems' volume on a stock-by-stock basis. Both equity and debt markets have become more open internationally, enabling companies to raise capital where it is most advantageous and investors to diversify their A short examination of the business of advertising.
Regulators have adopted more risk-based approaches, increased their use of data and analytics, and improved coordination and information sharing. FINRA's examination program is now substantially risk-based, enabling us to allocate our resources to higher-risk firms and individuals.
For example, we identify registered representatives with higher risk profiles using analytics, resulting in expedited regulatory responses. FINRA is also sharing information more frequently with domestic and international securities and banking regulators, in particular with the U.
Recurring Challenges In addition to the positive changes FINRA has observed, there are a number of lessons learned that firms can find instructive. Over the years, FINRA has observed that challenges in five areas contribute to firms and registered representatives at times compromising the quality of service they provide to customers as well as contribute to compliance and supervisory breakdowns.
Addressing these challenges will enable firms to get ahead of many of the concerns that FINRA raises in this letter. Putting customer interests first: The harm caused by this may be compounded when it involves vulnerable investors e. Poor advice and investments in these situations can have especially devastating and lasting consequences for the investor.
Irrespective of whether a firm must meet a suitability or fiduciary standard, FINRA believes that firms best serve their customers—and reduce their regulatory risk—by putting customers' interests first.
This requires the firm to align its interests with those of its customers. Many of the problems we have observed in the financial services industry have their roots in firm culture.
A poor culture may arise, for example, if firm management places undue emphasis on short-term profits or pursues rapid growth without a concomitant concern for controls. Beyond creating the proper business environment for a good culture to flourish, firms' boards and senior executives must articulate and practice high standards of ethical behavior that are expected and visible throughout the organization and are embedded in the firm's incentives.
These standards should come from the board and executives and not be viewed as a compliance task. The absence of stated standards can contribute to failures at the individual broker level e.
Firms must protect their culture against individual bad actors, as well as firm wide behaviors that can gradually erode that culture. Firm policies should signify that poor practices, whatever the magnitude of the harm caused or potential implications, will not be tolerated.
Supervision, risk management and controls: A firm's systems of supervisionrisk management and controls are essential safeguards to protect and reinforce a firm's culture. Maintaining the right culture includes having robust processes around basic functions such as hiring.
Strong supervisory and risk management systems also prevent inadvertent harm to customers e. Proactive supervisory programs and controls play a crucial role in this effort and many firms have turned to data analytics to help identify problematic behavior.
One indicator that a firm is succeeding in a proactive approach would be that it has already identified and addressed the concerns FINRA identifies in this letter.
Product and service offerings: While firms have improved new-product review processes, the sales of novel products and services remain a regulatory flashpoint. Some of the issues that have caused harm to investors and landed firms in regulatory difficulties include product complexity, opacity in the market for a product or its underlying components, insufficient or generic disclosure, enticing teaser rate fee structures and insufficient training for salespersons to understand the products.
These challenges underscore the need for firms to continue to conduct rigorous new product reviews, assess reasonable-basis and customer-specific suitability prior to offerings and permit wealth management to make independent decisions about the products and services that are best for their customers.
Conflicts of interest are a contributing factor to many regulatory actions FINRA and other regulators have taken against firms and associated persons.
While we have observed positive change since we issued the Report on Conflicts of InterestFINRA has also recently announced enforcement actions involving firms' failure to adequately address conflicts of interest by offering favorable research in connection with potential investment banking business.
And, we continue to focus on fee and compensation structures that lie at the heart of many conflicts and which can at times compromise the objectivity registered representatives provide to customers. FINRA underscores the importance of firms moving to identify and mitigate conflicts of interest.That witness, Rachel Jeantel, was a friend of Trayvon Martin's who ended up fidgety and hostile after the defense poked many holes in her story.
Her testimony ended up being a boon for the defense. The Office of Compliance Inspections and Examinations (OCIE) conducts the SEC’s National Exam Program (NEP).
The NEP’s mission is to protect investors, ensure market integrity and support responsible capital formation through risk-focused strategies that: (1) improve compliance; (2) prevent fraud; (3) monitor risk; and (4) inform policy.
At about 2 p.m. on Wednesday, Dec. 19, , CNBC’s Kate Kelly broke the news that billionaire Bill Ackman’s hedge fund had taken a massive short position—about $1 billion worth, we know now.
Programmatic Advertisers Grow More Worried About Fraud, Turn to DSPs With Proven Track RecordsAmazon Advertising Platform has edged Google DoubleClick Bid Manager as the most commonly used demand-side platform (DSP). Amazon Advertising Platform (AAP) has edged ahead of Google DoubleClick Bid Manager as the most commonly used demand-side platform (DSP) among .
marketing by nonprofits, global marketing, and mass marketing using the Internet, the best answer is social influence marketing (SIM), choice D, because it's the most precise. The characteristics of package labels include all of the following EXCEPT that. January 8, Introduction. The Regulatory and Examination Priorities Letter identifies topics that FINRA will focus on in the coming year, and these include some new topics as well as others that remain ongoing areas of focus.