Keeping up with compliance requirements is always a critical imperative in the highly regulated broker-dealers sector.
On Jan. 18, 2023, the Financial Industry Regulatory Authority (FINRA) issued a regulatory notice regarding its amendment to Rule 2231 (Customer Account Statements), which added eight new supplementary materials to the rule. The supplementary materials pertain to:
The amendment will go into effect on Jan. 1, 2024.
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Under Rule 17A-5, annually, most member firms not claiming an exemption to Rule 15c3-3 must file a compliance report that includes an assertion that the broker-dealer established and maintained controls that would detect or prevent non-compliance with FINRA Rule 2231. Material weaknesses in complying with this rule must be reported to the relevant regulatory agencies in a timely basis.
We have increasingly seen executives highlight the challenges in developing efficient and effective compliance programs meeting regulatory requirements. In 2021, Grant Thornton conducted a survey of over 400 C-suite executives, including chief compliance officers, and the results indicated that organizations see compliance as critical, and they need to consider automation to minimize errors. Organizations may wish to have a robust review of their environment to identify all areas of compliance and controls that are currently performed with manual tasks. Getting compliance right is the baseline for any firm, as it creates the net advantage of decreasing potentially disabling fines and penalties and gives your organization the ability to focus on the future.
In the regulatory notice, FINRA states that Rule 2231, as amended, applies to member firms prospectively, and that because Rule 2231 harmonizes the prior NYSE provisions, NYSE firms that waived FINRA membership must now comply with amended Rule 2231.
The update to Rule 2231 reinforces the need for member firms to continuously adapt their policies to the new digital age. With technology continuing to evolve and new pathways for interacting with customers expanding, member firms should see to it that they have a robust, agile compliance program in place that can account for updated rules and guidance.
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