The FINRA Attorney Guide Guide to Ensuring SEC & FINRA Compliance At Your Firm

The FINRA Attorney Guide Guide to Ensuring SEC & FINRA Compliance At Your Firm

Legal GuideIf you’re part of the financial services industry the fact that regulations have tightened over the past few years won’t surprise you. The public has increased pressure on governing bodies and in turn FINRA and the SEC have become drastically more stringent in their tactics.

Although growing regulation might be viewed as beneficial by the investors and clients of this industry, firms have had to tackle growing costs and increasing complexities to comply with the new rules. Avoiding any disciplinary action from either of these regulators seems to become harder and harder.

Have a Strategy in Place for Integrated Compliance

Weak internal controls are often regarded as the primary reason for lack of compliance at a broker-dealer or investment adviser. To avoid this issue, consider automating all the compliance work needed for your business. Form a strategy and work with experts to develop ways in which paperwork can be processed and tracked without human error. Software vendors offer solutions to help your business store essential data and get rid of other non-material information.

Develop a Compliance-Oriented Culture

Developing an efficient culture of compliance is a challenge, but if achieved, the rewards are immense. This may be easier to do in early-stage firms which operate on a smaller scale, but with enough time and effort the culture can be shifted towards more ethical behavior. This, in turn, will lead to better compliance across the board, which may lead to fewer expensive encounters with regulators and disgruntled investors.

Take the time to educate your staff about the issues the industry is facing, the impact of new regulations, and what they must do to ensure that even perceived misconduct does not take place. Such culture can only be formed at the very top before it trickles down to the rest of the organization, so cultivate leaders within the firm based on their fostering a “culture of compliance” approach.

Pay Attention to Your Online Presence

Every company in the world has realized the power of blogging or participating on social media. It can be the most effective form of advertising and building engagement, but the regulators are becoming more stringent in terms of what you do online. If you run a blog, try not to make recommendations without disclosure, show performance stats which may not comply with the rule, or make unsubstantiated claims.

Pay careful attention to how your Tweets and Facebook likes are perceived and avoid making recommendations for specific products or services, as this involves a lot of disclosure or equal an endorsement. If you work at a larger firm, seek pre-approval for online interactions and if you’re a small firm, do your research on your firm’s social media guidelines.  It is likely contained in the Compliance Manual.

Marketing with Ethics

When you consider hiring a marketing consultant, ensure they are compliance-savvy. If you handle your own marketing, try to avoid making any guarantees; do not make unsubstantiated comparisons; do not make inferences about satisfied customers; present your past performance with full disclosure; and, of course, make it very clear that investing money comes with inherent risk.

There’s a lot more you can do to better comply with applicable regulations but these four areas are the most essential steps to take to ensure that your firm won’t be in legal hot water with the financial regulatory agencies.

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