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Why Finra is Committing to Regular Internal Reviews

By Rita Raagas De Ramos May 16, 2019

In a bid to increase responsiveness to its broker-dealer members, Finra will embed it's new review program into the self-regulator’s regular operations, says president and CEO Robert Cook.

The so-called Finra 360 program is the SRO’s “comprehensive self-evaluation and organizational review” that it started in March 2017.

The cycle of “listening, reflecting and acting” will continue going forward, even when Finra has already acted on the feedback it has received from the industry and other stakeholders over the past years, Cook said Wednesday at Finra’s annual conference in Washington D.C.

Back in 2017, Cook said the review was needed because it had been 10 years since Finra was created from the merger of the NASD and the regulatory arm of the New York Stock Exchange.

Cook — who previously described himself as coming “from outside the organization” and so can look at it “with the benefit of fresh eyes” — said the review was much-needed because a comprehensive, organization-wide self-assessment had not been done in the decade since its creation.

Two years since Finra 360 started, Cook said the SRO “got a lot done.”

These “accomplishments” include focusing on engagement with member firms; more transparency in operations, finances, and resource and fine usage; and significant changes in organizational structure and processes.

In embedding Finra 360, the SRO is committing to helping deliver more compliance support to its member firms, according to Cook.

“It is the fuel that drives engagement with stakeholders,” Cook said.

Finra 360 addresses the question “Are we delivering on benefits of being an SRO?,” according to Cook.

Robert Cook (Getty)

Cook said the benefit of an SRO isn’t lost on him. Being an SRO is an advantage because Finra can have good engagement with member firms, can adjust standards that may be more technical and in need of further revision than what a state regulator would handle, and can focus on delivering compliance support.

All that “is better than a pure exam approach,” Cook said.

The following actions have been a direct result of the Finra 360, according to the self regulator:

  • integrating two enforcement programs into a single unified structure;
  • releasing an examinations findings report publicly detailing observations from the prior year's examinations;
  • publishing a summary of Finra’s budget and financial guiding principles;
  • launching a small firm helpline to address routine questions about Finra;
  • creating an innovation outreach initiative to address growing activity in fintech;
  • increasing funding for training of examiners and regulatory coordinators;
  • updating the activities of Finra’s advisory and governance committees;
  • enhancing transparency;
  • further advancing Finra’s risk-based approach to examinations and implementing certain process improvements in how the SRO interacts with member firms in the exam context.