After attending the May 2019 Annual FINRA Conference it is still evident that High Risk Brokers are still a priority and an area of ongoing concern for FINRA. During this conference we attended an informative break-out session with a discussion panel focusing on heightened supervision and Regulatory Notice 18-15.

It was right before last year’s annual conference that FINRA released it Regulatory Notice 18-15 regarding Heightened Supervision. FINRA noted that there are times where heightened supervision of an advisor may be appropriate. This notice stated that “FINRA requires member firms to establish and maintain supervisory systems for each of their associated persons and to test and verify annually that they have established reasonable procedures, including procedures for heightened supervision of associated persons, where necessary.”

This year’s discussion panel noted that FINRA is still looking for:

• Broker association with firms that have been previously disciplined by FINRA
• Previous disciplinary action taken against the broker by FINRA
• How many examinations have been failed by the broker?
• Age of disclosures. How long ago has the broker been disciplined?
• History of complaints and arbitrations
• Number of broker reviews done by FINRA

FINRA is also stressing this year that you examine these issues and identify “high-risk” brokers during the hiring process.

FINRA's 2019 Risk Monitoring and Examination Priorities Letter stated in regards to high risk brokers that, “we will continue to enhance our examination program to evaluate how firms address these risks in their hiring practices and supervision programs.”

Innovative regulatory technology is playing a more prominent role for supervisors in their efforts to become more efficient, effective and risk-based in their supervision methods.

​With our Eagle Eye application’s risk-based approach your workflow processes will get easier, faster, and more effective. With increased system intelligence, enhanced lexicon capabilities, system learning, and detailed evaluation of results content, Eagle Eye automatically discovers your riskiest advisors and focuses your attention to where it’s needed.

Our Eagle Eye’s innovative “Heighten Supervision Mode”. The flexibility of this application empowers you to monitor your advisors at a variety of levels. For those that push the envelope a heightened level of supervision may be required. Eagle Eye will dig deep and with “Eagle Eye” precision discover and notify you of your advisors’ online presence.

Eagle Eye allows you to customize your supervisory approach without worry, and without additional charges or fees. Contact us today for your personalized demo and we will show you how our “Heightened Supervision Mode” will benefit your firm.

Are you concerned that you might have unidentified “high-risk” brokers at your firm? Have you identified a “high-risk” broker, but are unsure what to do next? Are you documenting this whole process and what you find? Let us help you address any concerns you might have. Contact us today.
 
Source: FINRA.org 

In January of this year FINRA release it “2018 Regulatory and Examination Priorities Letter”. High-risk firms and rogue brokers were one of the top concerns cited by President and CEO, Robert Cook.

Then on April 30, 2018, FINRA released it Regulatory Notice 18-15 regarding Heightened Supervision. FINRA noted that there are times where heightened supervision of an advisor may be appropriate. This notice stated that “FINRA requires member firms to establish and maintain supervisory systems for each of their associated persons and to test and verify annually that they have established reasonable procedures, including procedures for heightened supervision of associated persons, where necessary.”

In May at FINRA’s Annual Conference there was a discussion regarding the criteria FINRA uses to identify high-risk activity. This discussion noted that FINRA is looking for:

• Broker association with firms that have been previously disciplined by FINRA.
• Previous disciplinary action taken against the broker by FINRA.
• How many examinations have been failed by the broker?
• Age of disclosures. How long ago has the broker been disciplined?
• History of complaints and arbitrations.
• Number of broker reviews done by FINRA.

 
Several times this year FINRA has stressed the importance of “heightened supervision for high-risk brokers”. This should be one of the top priorities for your firm.

Do you have WSPs addressing these issues?

Are they causing you additional time, work, documentation, strain, and monitoring for your supervision department?

Our Eagle Eye application has an innovative “Heighten Supervision Mode”. The flexibility of this application empowers you to monitor your advisors at a variety of levels. For those that push the envelope a heightened level of supervision may be required. Eagle Eye will dig deep and with “Eagle Eye” precision discover and notify you of your advisors’ online presence.

Eagle Eye allows you to customize your supervisory approach without worry, and without additional charges or fees. Contact us today for your personalized demo and we will show you how our “Heightened Supervision Mode” will benefit your firm.
 
Source: FINRA.org 

Did you read FINRA’s news release on October 1, 2018, entitled “FINRA Announces Plan to Consolidate Examination and Risk Monitoring Programs”? (Read the full-text news release)

FINRA President and CEO Robert W. Cook said, “By directing our expertise and resources in a more tailored way, we will become more effective at examining for compliance.”

Bari Havlik, who is overseeing this new program said, “Implementing a unified program structure will help make us a more agile and risk-focused regulator.”

So what does this mean for you as a supervisor?

This is a potentially massive shift in focus when it comes to FINRA exams and while it’s early, it appears that exams will now be more comprehensive with a wider area of focus than has been done in the past. Instead of focusing on only trading compliance or financial compliance, exams will likely be broader in nature. This new program is likely to zero-in on the supervision processes your firm has in place beyond the focused scope you’ve been used to.  
​
This consolidation will force firms to dig a deeper into their WSPs and supervision processes including an examination of how they supervise the web.  

We have over 15 years of experience in providing leading-edge compliance and web supervision software applications and website monitoring and archiving solutions for the financial industry.

Contact us today. Tell us your concerns when it comes to your “Risk Monitoring Programs” and we will share with you the solutions SiteQuest Technologies has developed for the financial industry.

Recently the Division of Securities, Utah Department of Commerce fined two credit unions and a licensed broker-dealer for failing to supervise the advisors working within the credit unions. (read the full report)

These credit unions are not registered broker-dealers or investment advisors. They entered into a networking agreement with a third-party broker-dealer to provide securities brokerage services to their credit union customers through registered representatives. In this case, the parties involved were not closely monitoring the actions and communications of these advisors with regards to how the advisors and the credit unions branded these services. The “lines were being blurred” and it was not clearly disclosed that these advisors worked for the third-party investment service provider, and not for the credit unions.

The emails, marketing materials, communications in print and electronic were not being supervised and in the view of the regulator, causing confusion with customers being misled. As a result, the broker-dealers and the credit unions were fined $750,000.

FINRA and the SEC are not the only regulatory agencies requiring firms to monitor their advisors. Each state has their own division of securities regulators.

Have you entered into a third-party agreement with another company to provide security brokerage services to their clients? Do you have advisors that are working in the facilities of these partners?

The biggest question of all is, “Are you sufficiently monitoring your advisors and their online presence?”

The use of our Eagle Eye application would have identified where the broker dealers’ presence was online such as social media, blogs, online articles, Yelp, YouTube and more, allowing you to review each URL. Our SQWatcher application would have alerted you to any changes on their websites ensuring that your supervision department could review and approve wording changes before they go live on the web.

We’d love to tell you more. Contact SiteQuest Technologies today to see how our applications can aid in your supervision responsibilities, saving you time and lowering your risk.

In September 2017, a West Coast financial firm was fined $35,000 by FINRA. It was found that the firm failed to maintain documentation or review the websites maintained by the firm’s registered representatives. (read full report) Are you responsible for monitoring your registered representatives’ websites and online presence? It can become a daunting and time-consuming task. SiteQuest Technologies brings you years of experience when it comes to web monitoring, archiving, and website analysis.
 
SQWatcher is our second product in this category and we have added cutting-edge technology that makes it even easier for you to keep track of what’s going on with your website(s). SQWatcher is configured with specialized “watchers” that look for the types of website changes you want to review. This technology offers a lot of flexibility allowing SQWatcher to adapt to your needs. Our archiving feature backs-up your website(s) daily so that you have a running history to help you quickly and easily respond to a regulator when audited.
 
In addition, this West Coast firm was also fined for “failure to establish a policy or system for approval, for their registered representatives’ business social media accounts, and did not review, approve, supervise, or retain any of the social media accounts maintained by registered representatives for securities-related business purposes.” 

Our Eagle Eye program will help you quickly identify any social media accounts that your registered representatives own. Allowing your firm to take action and comply with FINRA requirements. The system's automated documentation and screenshots of your findings will help you respond to a regulator.
 
Don’t let the time constraints of monitoring and documenting your advisor sites and web presence open you up to fines and the associated internal and external costs of a FINRA investigation like the one received by this firm. The cost of our Eagle Eye and SQWatcher programs are significantly smaller. Save time and money while protecting your firm from preventable fines. Our Eagle Eye and SQWatcher programs have two separate purposes, but working together they become a force multiplier in aiding our clients with their responsibilities.
 
Contact us today for your personalized demo. We will help match our programs to your needs.
 
Source: FINRA Case #2013034981501 ​