FINRA Taking a Closer Look at Conflicts of Interest: Are You Prepared?

Adviser compliance NYCThe Financial Industry Regulatory Authority (FINRA) wants to know how you identify and manage conflicts of interest.  In a recent targeted examination letter, firms were informed that FINRA would “like to meet with executive business and compliance staff of your firm to discuss the firm’s approach to conflict identification and mitigation.”

To prepare for the meeting, FINRA is requesting that firms submit the following information to FINRA by September 14, 2012:

  • Summary of the most significant conflicts the firm is currently managing.
  • Names of departments and persons responsible for conducting conflicts reviews.
  • Summary of the types of reports or other documents prepared at the conclusion of a conflicts review.
  • Names of departments and persons who receive any final report or other documentation summarizing a conflicts review.
  • Available dates and times in the fourth quarter of 2012 that executive management of your firm can meet with FINRA staff for approximately three hours to discuss the firm’s approach to conflicts of interest.

According to FINRA, developing a better understanding of how broker-dealers address conflicts and the challenges they face “will help FINRA develop potential guidance for the industry and determine other steps FINRA could consider taking in this area.”

Many predict that these letters suggest that enforcement actions involving conflicts of interest are on the horizon. Therefore, firms are advised to make sure their policies and procedures will pass muster.

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