The 2024 FINRA Annual Conference provided a wealth of information and thought-provoking discussions on current industry topics and future considerations for FINRA-registered firms and representatives. The conference commenced with opening remarks from Eric Noll, the chair of the board, and Robert Cook, the CEO, setting the stage for the rest of the week’s events. 

Throughout the two-day conference, various sessions covered a wide range of industry-related subjects. However, a few key issues consistently emerged across multiple sessions, indicating their significance as major focus areas for regulators in the present and near future. 

Below are the four biggest takeaways from the conference:  

Remote Exams and Supervision 

A main key area of focus was the shift towards remote exams and supervision. While FINRA is pushing for more remote exams, the SEC is more hesitant. A new pilot program has been introduced, acknowledging that supervisory responsibilities can now take place in a work-from-home setting. This new Remote Supervisory Location (RSL) classification requires audits only once every three years, as opposed to annually, and is less intense than the previous On-Site Supervisory (OSJ) requirements. 

Emerging Challengers and Opportunities

When asked about the biggest changes on the horizon and what keeps them up at night, industry leaders mentioned the impact of cryptocurrencies and the potential implications of AI and large language models. These developments raise questions about how firms will utilize these technologies and how regulators will oversee and regulate them. 

Preventing Cyber Attacks

In the afternoon session on the first day, speakers from FINRA, the FBI, and the White House discussed the importance of preventing cyber-attacks in the financial services space. They emphasized the collaborative efforts between these entities and private sectors, such as hospitals and internet providers, to mitigate threats effectively. 

The sophistication and complexity of cyber-attacks were highlighted, with ransomware being a particularly popular tactic. In 2022, $600 million was paid in ransom attacks, and this figure increased to $1.3 billion in 2023. Despite these challenges, the FBI noted that the financial services industry is as well-prepared, if not more so, compared to other industries. 

Off-Channel Communications  

In a breakout session, the topic of off-channel communications was discussed. It was emphasized that this covers all communications between advisors and clients, not just texts or emails. Firms were divided on whether they allow messaging with clients, with 60% allowing it and 40% not. 

The importance of training and annual attestations was stressed to ensure that representatives and advisors understand what is expected of them. Senior-level contacts play a crucial role in setting the tone for an effective and compliant culture. 

Red flags to watch out for include business cards, email signatures, or references to personal emails or phone numbers, which could imply off-channel communications. The cost and complexity of effectively monitoring these communications can be extreme and intense. 

 

As the financial services industry navigates these changes, it’s essential for firms to stay proactive, adapt to new technologies, and maintain a strong focus on compliance and risk management. By staying informed and collaborating with regulatory bodies, the industry can continue to thrive in the face of these challenges and opportunities.