The Financial Industry Regulatory Authority (FINRA) has released its annual regulatory oversight report for 2024, reflecting FINRA's commitment to enhancing transparency. This report encompasses findings from the regulatory supervision, market regulations, and enforcement programs.
FINRA's 2024 report marks a shift by introducing updated content focused on emerging areas like crypto assets, AI's impact on regulatory obligations, and off-channel communications' supervision and retention guidance. Additionally, it highlights rules, compliance considerations, noteworthy findings, and effective practices within various topical areas.
The report emphasizes the criticality of cybersecurity compliance, referencing the SEC and FINRA's rules for safeguarding customer information, business continuity, and incident reporting.
Cybersecurity, AML Practices, and Compliance
Recent rules released by the SEC demand that public companies disclose material cybersecurity incidents and annual cybersecurity risk management details. The proposed rule intends to mandate cybersecurity risk management across market participants, emphasizing incident reporting and risk-focused policies.
The report provides a comprehensive checklist covering technology management, vendor oversight, change management, system availability, data protection, and cybersecurity events. It urges firms to implement robust supervisory controls, address system disruptions, and conduct thorough identity verifications.
Detailed guidelines within the report underscore AML program requirements, customer onboarding, suspicious activity reporting, and independent testing. It highlights the importance of aligning AML programs with evolving business models and consistently assessing transaction risks.
FINRA has enumerated common shortcomings in compliance, emphasizing inadequate verification of customer identities, responses to red flags, due diligence, monitoring, and handling of FinCEN information requests. It additionally offers effective practices for risk assessment and customer identity verification.
FINRA's 2024 report emphasizes cybersecurity, AML practices, and compliance nuances, underscoring the evolving nature of regulatory requirements and urging firms to prioritize robust frameworks to ensure compliance and mitigate risks.
Communication Guidelines
The 2024 FINRA Annual Regulatory Oversight Report is centered on communications between financial firms and the public, outlining stringent regulatory obligations and nuanced considerations. These regulations classify communications and enforce content standards adaptable to evolving communication technology and practices.
They emphasize the necessity of fair, balanced, and transparent communications, free from misleading statements and the inclusion of necessary material information.
A spotlight is cast on mobile app communication, urging firms to include risk disclosures, distinguish between services, establish robust supervisory systems, and ensure accuracy in the information displayed.
Specific attention is drawn to retail communications regarding crypto assets, municipal securities, income-sharing programs, and ESG factors, emphasizing the need for fair and balanced presentations and clear disclosure of terms and conditions.
