Finra Scrutinizes Broker Continuity Plans

Finra Scrutinizes Broker Continuity Plans

By Alex Padalka January 9, 2018

The industry’s self-regulator’s 2018 regulatory and exam priorities include several perennial areas, but Finra is increasing scrutiny of business continuity plans, how advisors move clients out of brokerage accounts to fee-based accounts, and digital currencies, among other new areas.

In light of Hurricanes Harvey and Maria, Finra intends to ensure member firms have adequate business continuity plans. The regulator also plans to continue monitoring suitability of investment recommendations, with a focus on individual retirement account rollover recommendations to participants in employer-sponsored plans. Finra will also give more scrutiny to instances when reps recommend clients in brokerage accounts switch to fee-based accounts if the switch “clearly disadvantages the customer.” This includes situations in which the recommendation is made shortly after the sale of a product with front-end sales charges, according to Finra. The regulator also plans to closely follow developments in cryptocurrencies and initial coin offerings and the role member firms play in trading the assets.

Finra will also scrutinize broker activity in microcap stocks, including schemes targeting senior clients. Finra also reminds members about the requirement to file suspicious activity reports tied to potential financial exploitation of seniors. The regulator also plans to assess margin loan practices and the use of securities backed lines of credit.


Identifying high-risk brokers and companies will remain a top priority for the regulator. Finra plans to monitor instances of recommendations of complex products to unsophisticated investors, rollovers of qualified plans into non-qualified accounts for seniors, and situations in which reps obtain power of attorney or trustee access to customer accounts.

Cybersecurity, anti-money laundering programs and effective liquidity planning all remain major priorities as well.