FINRA Announces Consolidated Exams in 2020

FINRA recently announced the consolidation of its three exam functions into a single, unified program—a process that began in October 2018. Previously, FINRA’s examinations were divided among three different programs responsible for business conduct, financial and trading compliance. According to FINRA, the consolidation brings those programs under a single framework designed to better direct and align examination resources to the risk profile and complexity of member firms.

Because FINRA’s examination process was previously largely geographically based, a major complaint of firms was that, oftentimes, their examiner didn’t always understand the scope of their business. The goal of the new program is to tailor the business model of each firm with the expertise of their examiners, while remaining consistent across like topics and issues. This new alignment is estimated to affect approximately 800 FINRA staff members.

As part of the new program, all FINRA member firms will be grouped into one of five main firm business models: Retail, Capital Markets, Carrying and Clearing, Trading and Execution, and Diversified. Each of these groupings has several sub-groups to more precisely categorize firms with similar business models and activities. Each grouping is headed by a senior leader. Each firm will be assigned a single point of accountability, the leader who has ultimate responsibility for the ongoing risk monitoring, risk assessment, planning and scoping of examinations tailored to the risks of a firm’s business activities.

In the coming weeks, FINRA will notify each member firm of its single point of accountability and its new risk monitoring teams. In FINRA’s Unscripted podcast, VP of Supervision, Bari Havlik, mentioned that some regulatory coordinators will remain the same, while others will change. The end goal being that the examiners firms work with will be someone who truly understands their business.

FINRA will also being doing away with District Directors, as they have been replaced by those single points of accountability, as mentioned above. Havlik additionally mentioned that there will be a delay in firms finding out about their upcoming exam cycles. This information will be released mid-January, as opposed to the end of Q4.

According to Havlik, this new structure will kick off in January 2020, with changes likely continuing to take place throughout the year. To learn more about the exam and risk monitoring transformation, listen to the FINRA Unscripted podcast.