Banking News – SEC Staff and FINRA Issue Risk Alert on Broker-Dealer Branch Office Inspections 
FOR IMMEDIATE RELEASE
2011-250
Washington, DC, November 30, 2011 – The Securities and Chat Fee’s Office of Falling in line Inspections and Examinations (OCIE) and the Fiscal Diligence Dictatorial Power (FINRA) today issued a Risk Alert and a Dictatorial Notice on broker-dealer branch inspections, and offered suggestions to help securities diligence firms better perform this key management gathering.
“A robust process for self-inspection of branch offices is a vital element of a firm’s falling in line and supervision process, and a vital part of a wide-ranging risk management program,” said Carlo di Florio, Boss of OCIE. “This Risk Alert highlights practices that are characteristic of commanding branch office management systems, and describes major deficiencies that SEC and FINRA examiners have found in the branch inspection process.”
“An commanding risk based branch office inspection program is an vital element of a broker-dealer’s management system and, when constructed and implemented practically, it can better protect investors and the firm’s own wellbeing,” said Stephen Luparello, Vice Chairman of FINRA. “FINRA encourages broker-dealers to review this guidance and thought-out enhancements to their own branch office inspection programs.”
Along with point equipment outlined in the report, commanding practices experimental by examiners include:
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Using risk breakdown to spot whether party non-supervising twigs should be inspected more often than the FINRA-vital minimum three-year cycle, with more normal inspections of twigs meeting certain risk criteria. In addendum, some firms conduct “re-audits” when routine inspections reveal a high number of deficiencies, repeat deficiencies, or serious deficiencies. Typically, these re-audits and audits for cause are conducted as unexpected inspections.
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Using scrutiny reports and employing current equipment and techniques to help spot risks and develop a bespoke deal with for branch office inspections based on the type of affair conducted at each branch.
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Employing wide-ranging checklists that incorporate before inspection findings and trends noted in domestic reports such as audit reports.
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Conducting unexpected branch inspections either at random or based on certain risk factors. “Bolt from the blue” exams may yield a more realistic picture of a broker-dealer’s management system as they reduce the risk that party RRs and principals might attempt to falsify, hide, or ruin records in anticipation for an domestic inspection.
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Concerning certified senior personnel in several branch office examinations each year.
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Incorporating findings of branch office inspections into management in rank or risk management systems and using a federal, wide-ranging falling in line list that enables falling in line personnel in various offices to access to in rank about all of the firm’s RRs and their affair actions. Such a system appears to be very useful when supervising self-determining service source RRs single across a broad geographic area.
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As long as branch office managers with the firm’s domestic inspection findings and requiring them to take and paper remedial action.
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Tracking remedial action taken by each branch office manager in response to branch audit findings.
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Inspiring the frequency of branch inspections, or their scope, or both, in cases where registered personnel are allowed to conduct affair actions other than as linked persons of a broker-dealer, for example away from the firm.
This is the second in a long-lasting series of Risk Alerts that the SEC’s inhabitant examination staff expects to issue. These ID are projected to alert senior management, risk management, and falling in line managers in the securities diligence to noteworthy risks identified by the SEC’s inhabitant examination staff, so that diligence members can more fruitfully address those risks. The later SEC staff contributed substantially to preparing this Risk Alert: Julius Leiman-Carbia, Daniel Gregus, Rich Hannibal, George Kramer, Barbara Lorenzen and Karol Pollock
The later FINRA staff also contributed substantially to preparing this Risk Alert: Michael Rufino, Paul Fagone, Donald Litteau and George Walz.
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For more in rank contact:
Carlo di Florio
Boss, Office of Falling in line Inspections and Examinations
202-551-6200
Julius Leiman-Carbia
Normal Boss, Office of Falling in line Inspections and Examinations
212-336-0970
George Kramer
Senior Counsel to the Boss, Office of Falling in line Inspections and Examinations
202-551-8959
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SEC.gov Updates: Press Releases – http://www.sec.gov/news/press/2011/2011-250.htm
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