Heightened supervision of branch offices

Abstract

Purpose

To explain expectations of the US Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) as to what constitutes successful branch inspection programs for broker-dealers.

Design/methodology/approach

Summarizes FINRA’s rules requiring firms to implement branch inspection programs; examines the SEC’s and FINRA’s joint 2011 National Examination Risk Alert, which expanded upon FINRA’s rules, requiring firms to conduct risk-based analyses on each branch office to determine the appropriate frequency, intensity, and focus of inspections; discusses FINRA’s expectation that firms examine their registered representatives’ financial circumstances to reduce the risk of fraud; explains how FINRA’s Comprehensive Automated Risk Data System may impact branch inspections; and recommends several sources that firms should review when implementing a successful branch inspection program.

Findings

Regulators have heightened their expectations as to what constitutes successful branch inspection programs for broker-dealers.

Practical implications

To avoid regulatory intervention and discipline, firms should continue to review their policies and procedures to ensure that their programs are sufficiently comprehensive.

Originality/value

This article will encourage firms with branch offices to review their branch inspection programs, and assist those firms in implementing sufficiently comprehensive policies and procedures.

Citation

Nathan, D.A., Navarro, L. and Matta, K. (2015), "Heightened supervision of branch offices", Journal of Investment Compliance, Vol. 16 No. 2, pp. 18-21. https://doi.org/10.1108/JOIC-04-2015-0030