Inside Peek: 2023 Report on FINRA’s Examination and Risk Monitoring Program
FINRA recently released its “2023 Report on FINRA’s Examination and Risk Monitoring Program,” which provides member firms with a summary of findings from recent oversight activities.
What is particularly interesting is that, for the first time, this annual report introduces a new Financial Crimes section, including an overview of Manipulative Trading. In this section, FINRA reviews how they define manipulative trading and how well (or not) member firms are set up to identify market abuse. The report details key processes that FINRA views as critical to surveillance programs as well as gaps that were identified in their investigations.
Amongst the key processes that FINRA highlighted as crucial were:
- The ability to identify patterns
- A closer lens on uneconomic trading
- Monitoring for potential coordination across customers
- The process for determining thresholds for surveillance alerts
FINRA also highlighted some of its findings from its examination and risk monitoring program. These areas include:
- Inadequate Written Supervisory Procedures (WSP)
- Non-Specific Surveillance Thresholds
- Surveillance Deficiencies
This release from FINRA is yet another example of a regulator providing more focused guidance on trading risks and how firms can better mitigate them. It is more essential than ever that compliance practitioners pay close attention to the processes supporting their surveillance technology stack to more effectively monitor for market abuse and meet regulatory expectations. To review the findings from this report in more detail, download our viewpoint here.
Michael O'Brien
Nasdaq
Michael O'Brien is the Head of Product Management for the Sell-side & Buy-side Technology business at Nasdaq.
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