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FINRA – Summer Regulation

Beginning in Q3, the CEO and CCO(s) will receive the all-encompassing manifest of reports provided to you by your carrying firm(s).  This package of reports will outline ALL the reports available to your firm as well as a list of the reports you have requested. The report listing already provided to your firm is key.  Why? This same notification is provided to your examining authority.  Answers to questions you should know:

  • Do you know the reports you requested from you carrying firm?
  • Are these reports provided to your firm today?
  • Do you review these reports when available in a timely manner?
  • Do you archive these reports and evidence of your review?
  • If you need to take action on any specific report, do you document the action and results of said action?
  • Do you know the mix of your firm’s security transactions conducted through your clearing firm(s)?
  • Do you know if there is a concentration in any particular asset class – by RR, Branch, client?
  • Do you track trade errors, by RR, Branch, client?
  • Have you amended this list of reports due to product changes, trading habits, client changes, or market conditions?
  • If you have more than one clearing relationship, does your firm transact certain asset classes with specific clearing firms? If yes, is this documented and mandatory? Is it supervised?
  • Do you know the inventory of reports available from your carrying firm and their purpose?
  • Do you have a set of reports used for AML supervision?
  • Does your firm review new client trading habits regarding buy/sell frequency, microcap, deposits, and wires in/out?

Your carrying firm will be providing you with the inventory of reports shortly.  I strongly advise a careful and timely review. This listing of available reports can be overwhelming.  Depending upon your business model, it can be very important to your supervisory structure.  If you have any questions, contact your relationship manager at the carrying firm, meet internally with staff, review the risks to your firm regarding trading and new client & RR review procedures, client holdings and client account activity.  You may find a clearing report to help minimize the risks you and your staff identified as well as more efficient compliance procedures in detecting compliance infractions.  Most importantly, a duplicate has been provided to your examining authority.  Your next exam may require your knowledge of these reports.

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