FINRA Eyes Outside Activities

By Compliance Reporter,

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  Clifford Kirsch

The Financial Industry Regulatory Authority has signaled its intention to take a deeper dive into certain outside business activities during examinations this year.

FINRA officials warned in a recent letter to members outlining their 2011 exam priorities that firms should expect examiners to conduct substantive reviews of the outside business activities they approve involving private securities transactions, noted Clifford Kirsch , partner with Sutherland Asbill & Brennan . This is a step up from previous years, when examiners focused primarily on the process by which registered representatives notified their firms about plans to engage in an outside business activity and the way firms gave approval, Kirsch said. Firms should prepare for the possibility of being second-guessed by examiners about activities they approved, he added. A new FINRA rule on OBAs went into effect in part on Dec. 15 (, 2/4 ).

Another area where FINRA seems to have broadened its focus is on so-called vulnerable customers, Kirsch said. The 2011 exam letter expands the categories of at-risk customers that examiners will be focusing on beyond seniors to include those who are ill, retired or members of an affinity group, he said. In the letter, FINRA officials warned firms to ensure that any professional designations they let their reps use, such as ones that imply an expertise in retirement planning, must not be misleading.

A FINRA spokeswoman had no comment.

--Edward Beeson


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 Institutional Investor

This article appears in: Financial Advisor Center Business
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