Brokers can complain to Finra about exams – anonymously

Brokers like to complain about Finra exams. Now they have a chance to tell the organization exactly what they think — anonymously.

Brokers like to complain about Finra exams. Now they have a chance to tell the organization exactly what they think — anonymously.
This week, the Financial Industry Regulatory Authority Inc. began sending to each of its 4,125 member firms a questionnaire about the exam process. The survey covers areas such as Finra’s performance, the targeting of exams at particular firms, and the efficiency and timing of exams. It also asks for suggestions for improvement.
The industry-funded broker-dealer regulator is seeking “honest and candid input” by conducting the survey anonymously through a third-party firm, Finra chairman and chief executive Richard Ketchum said earlier this week at the Securities Industry and Financial Markets Association meeting in New York.
“This is an effort to try to get that criticism in a safe way,” Mr. Ketchum told reporters on the sidelines of the event.
On a SIFMA panel, he said Finra has enhanced its exam program over the last few years by making it “risk based” to better target potential problem firms. Exams also have become more “data driven,” he said, requiring firms to turn over more information to the regulator but reducing the amount of time Finra examiners spend at firms.
“We are interested as to what burdens we’re imposing and whether we’re looking at the right things,” Mr. Ketchum said of the survey.
The shortcomings of the exam process are well known, said Peter Chepucavage, general counsel at Plexus Consulting Group. He cited “duplicative exams” and “nitpicking.”
“They know what the answers are going to be,” he said. “When you have an exam process that requires a lot of time and a lot of people, you’re straining the system. You better have good results.”
Too often exams focus on administrative and other issues that don’t pose investor harm, said Linda Riefberg, a former Finra chief enforcement counsel.
“A lot of attention at the exam level is paid to inconsequential things,” said Ms. Riefberg, a partner at Cozen O’Connor.
Finra is not going to make the exam feedback public, but it will announce any changes subsequently made to compliance reviews.
“We’re going to take reaction in and try to figure out how to make the exam program more efficient, better and less burdensome,” Mr. Ketchum said.