On January 10, 2023, FINRA published its 2023 Report on its Examination and Risk Monitoring Program, identifying key areas of focus for broker-dealer exams this year. The Report covered 24 different topics related to core compliance responsibilities of broker-dealers and included four new focus areas: Manipulative Trading, Fixed Income – Fair Pricing, Fractional Shares, and Regulation SHO.
The Report included the following comments regarding the new risk areas:
- Manipulative Trading — includes inadequate written supervisory procedures, non-specific surveillance thresholds, and surveillance deficiencies
- Fixed Income – Fair Pricing — includes incorrect determination of prevailing market price, outdated mark-up/mark-down grids, failure to consider the impact of mark-up on yield to maturity, and unreasonable supervision
- Fractional Shares — includes reporting failures and inadequate supervisory systems and procedures
- Regulation SHO — includes findings on non-bona fide market making and impermissible reuse of locates
The Report also introduced a new Financial Crimes section consisting of three topics — Cybersecurity and Technological Governance; Anti-Money Laundering, Fraud and Sanctions; and Manipulative Trading. Other key areas addressed by the Report include complex products; Reg BI and Form CRS; and mobile apps.