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FINRA’s 2016 Examination Priorities and Technology


Written by Don Lee

FINRA has published its Annual Examination Priorities letter for 2016. This is an annual letter for all FINRA member firms to help them prepare for upcoming examinations and helps others update their compliance programs. This year, FINRA has devoted an entire section to Technology which includes Cybersecurity, Technology Management and Data Quality and Governance. It is evident based on FINRA’s inclusion of Technology that many Broker Dealers are now utilizing technology automation systems as part of their compliance programs to analyze data and reduce risk. If you are not using an automated compliance system, are your clearing firm’s exception reports providing enough information to produce quality alerts for effective decision making?

Data includes transaction blotters for trading and money movements which translates broadly into Suitability and Anti Money Laundering reviews. For most firms, data is typically converted by clearing firms into information produced in exception reports which is then used for decision making. Most of these firms are using clearing firm’s exception reports as information and alerts for decision making by management. The problem with clearing firm exception reports is that they are not tailored to the firm’s specific business lines. These reports are produced with overly broad parameters which in turn produces excessive noise in the results and may not give firms the alerts they need for their business lines. Another problem with exception reports is that many of them are built on legacy types of systems and aren’t adaptable to the changing regulatory environment firms face resulting in fixed and stale rules.

FINRA’s examination process for 2016 will be looking at how firm’s receive data, the quality of the data and how the data is analyzed and reported to management. This is based on its exam priority letter which states in part “FINRA will examine firm’s data governance, quality controls and reporting practices to ensure the accuracy, completeness, consistency and timeliness of data reported to firm management and to firm’s surveillance and supervisory systems.” FINRA will also be looking at firm’s compliance technology systems to ensure they are capturing complete and accurate data which may lead to poor quality alerts. FINRA cited this as an example in its exam priority letter referring to automated AML systems that are not capturing complete and accurate data.

FINRA seems to be seeing more firms using technology as part of their compliance program resulting in its inclusion of technology in its examination priority letter. Technology systems are the best way for firms to analyze the increasing amount of data and transform this into usable information (alerts) for management to review. Firms that are still analyzing data from their clearing firm’s exception reports are at a higher degree of risk of not properly analyzing the data to provide meaningful information for management. As an example, how many firms reviewing clearing firm exception reports are analyzing incoming wires against the client’s net worth, income and other KYC factors?

FinWebTech’s Catalyst Automated compliance system gives firms the tools needed to analyze their data and provide meaningful information for management. Catalyst’s tools allows firms to customize their rules and alerts to ensure they are always on top of their game with a work flow process for accountability. Catalyst is also priced to give firms of all sizes including small and medium sized firms access to technology.

About FinWebTech

FinWebTech is a Service as a Software (SaaS) company developing compliance automation applications to assist firms with ‘Big Data’ and the growing needs of compliance in the financial services industry. FinWebTech’s inaugural product Catalyst provides firms with: Automated Transaction Surveillance for AML and Suitability;  Risk Assessments and Risk Management tools; Trade Blotter Management, AML Management, Suitability Management and FINRA 2111 controls; Supervisory and Management Controls,  Audit Logs, KYC, Document Repository and other tools to assist compliance and AML departments manage their programs and reduce risk. Unlike other applications, Catalyst is unique because it was designed by an industry experienced Chief Compliance Officer for compliance. FinWebTech’s mission is to provide all financial services firms with access to compliance automation and has priced its products to give small to medium sized firms access to technology.

For more information on FinWebTech and Catalyst, please contact Don Lee at or 305-409-1307


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