In October, our team had the opportunity to attend the National Society of Compliance Professionals (NSCP) conference. Between booth conversations and packed sessions, we gathered some valuable insights we wanted to share with our community. Here are our key takeaways from some of the most impactful sessions we attended.
1.) Firms Continue to Opt-in to Remote Pilot Program
One of the most engaging sessions focused on FINRA’s Remote Supervision Pilot Program. About 40% of attendees indicated they were already participating in the pilot program, with another 10% planning to opt in next year. That tracks with what the presenters shared: 741 member firms (22% of all firms) have already jumped on board, with larger firms leading the charge.
The October 15th deadline for the first round of remote inspection reporting generated lots of questions. Firms needed to report the number of offices inspected both remotely and on-site, along with their significant findings. This led to one of the most valuable clarifications of the session: the difference between “findings” and “significant findings.”
Here’s how the presenters broke it down:
- “Findings” are one-time issues with small or no client impact that led to remedial action
- “Significant findings” involve more serious issues like undisclosed outside business activities (OBAs) or pattern/repeat issues
They provided a framework for categorizing findings based on:
- One-time occurrence versus pattern
- Nature of the matter
- Oversight versus intentional actions
- Client impact
- Regulatory reporting requirements (like late disclosures or reportable OBAs)
FINRA’s expectations for documentation caught many attendees’ attention. They want to see well-thought-out risk assessments and interview templates – and they expect these to be customized to each firm’s specific business model. One memorable example shared was the importance of documenting seemingly simple things like, “Do you shred paper at your house?” These details could protect your firm if a representative isn’t following through on their claimed practices.
Perhaps the most practical tip of the session: your program should evolve throughout the year based on your findings. The presenters stressed that you should be editing your interview questions based on trends you’re seeing. As one speaker put it, “If your December program looks identical to your January program, you’ve missed something.” This iterative approach shows regulators you’re actively managing and improving your supervision program.
2.) The AI Revolution in Compliance: 50% of Firms Are Already on Board
The artificial intelligence session was standing room only – and with good reason. We were surprised to learn that 50% of firms are already using some form of AI, with another 30% actively exploring it. What really grabbed our attention was the emergence of dedicated “AI Officer” roles at firms to manage enterprise-wide AI strategy.
The discussion around AI governance was particularly enlightening. Rather than just focusing on the technology itself, speakers emphasized the importance of understanding risks, educating staff, and developing a scalable approach. One interesting example shared was a tool called Red Tail that automatically summarizes meeting notes and files them in client folders – though the speakers were quick to note the importance of proper oversight and documentation.
3.) Enforcement Trends: FINRA Down, SEC Up, and What It Means for You
The Tuesday morning session on regulatory enforcement priorities was also a popular session with representatives from both FINRA and the SEC on the panel, along with a moderator from Eversheds Sutherland.
FINRA representatives shared that while their overall enforcement cases and fine amounts are trending downward, they’re shifting their focus. We noticed particular interest when they mentioned increased actions against smaller firms. FINRA emphasized their standardized approach to determining sanctions, pointing firms to their published resources for greater transparency in how they calculate penalties.
The SEC representatives, on the other hand, described a more aggressive enforcement stance, particularly regarding off-channel communications. The numbers they shared got everyone’s attention: multiple firms faced $35 million fines in September alone, with one firm hit with a staggering $125 million penalty. Unlike FINRA’s standardized approach, the SEC described their fine determination process as more individualized, considering factors such as:
- Firm size
- Scope of violations
- Number of registered individuals involved
- Firm’s compliance efforts
- Level of cooperation with investigators
One of the most debated topics was the value of self-reporting. September 2024 saw several firms self-report violations, and while they still faced fines, the penalties were reportedly lower. However, regulators made an interesting distinction: they emphasized that self-reporting alone won’t earn you credit – what they’re really looking for is “extraordinary cooperation.” This nuanced difference sparked quite a bit of hallway discussion after the session.
What This Means for Compliance Teams
For those who couldn’t make it to the conference this year, we’d suggest focusing on a few key areas:
- If you’re considering the remote supervision pilot program, start your risk assessment early and plan for regular program updates
- Think about how AI might fit into your compliance program, but don’t forget about proper documentation and oversight
- Review your communication policies and technology – regulators are clearly staying focused on this area
We left the conference feeling energized about the future of compliance and armed with practical insights to share with our clients. The industry is clearly evolving, and it’s exciting to see how firms are adapting to new challenges while maintaining robust compliance programs.
Have questions about any of these sessions or want to learn more? Feel free to reach out to our team – we’d love to share more detailed insights from our time at NSCP.
