Navigating the complexities of financial regulations can be challenging for broker-dealers. However, one key pillar for safeguarding investor interests is the FINRA compliance.  FINRA, or the Financial Industry Regulatory Authority, is a self-regulatory organization that oversees and regulates the securities industry, including broker-dealers. Its goal is to maintain the integrity of the financial markets and protect investors. This article aims to demystify the basics of FINRA compliance as it relates to broker dealer audits and explain how a PCAOB-registered accounting firm like Assurance Dimensions can help.


FINRA Explained

FINRA is a non-governmental self-regulatory organization (SRO) with a degree of authority over the securities industry and the NY Stock Exchange. It’s overseen by the Securities Exchange Commission (SEC) to safeguard customers and firms and ensure the integrity and fairness of financial markets. Broker-dealer firms are obligated to meet FINRA regulations related to their operations, sales practices, customer protection, and supervision. Let’s identify some of the crucial elements of FINRA compliance for broker-dealers.


FINRA Compliance Requirements

Meeting FINRA compliance involves adhering to a series of rules and regulations. These rules and regulations are extensive and subject to change, but they keep investments safe in our ever-evolving financial market. Some of the essential FINRA compliance requirements include the following:

  • Registration and Licensing: Broker-dealer firms and employees must be registered with FINRA and maintain the required licenses and qualifications. 
  • Sales Practices: Broker-dealers must follow FINRA rules when making recommendations and selling securities, as they must have a reasonable recommendation basis beforehand.
  • Customer Protection: There must be account safeguards for customer funds and securities.
  • Anti-Money Laundering (AML) Compliance: Broker dealer firms must establish and maintain AML programs to help them detect and report suspicious activities, such as money laundering.
  • Record-keeping: Maintain accurate and complete records, including client account information, transactions, and communications. 
  • Market and Financial Integrity: Integrity ensures there is no market manipulation and insider trading while also having fair and equitable trading practices. Broker-dealers must meet their financial responsibilities, including meeting capital adequacy standards to ensure financial stability.
  • Broker-Dealer Audits: Firms undergo regular audits and examinations to showcase they are in FINRA compliance with the set of rules and Federal securities laws. The deadline for filing the annual FINRA audit is no later than 60 days after the end of the fiscal year unless an extension is granted by the SEC. 


What happens if you don’t meet FINRA compliance requirements?

Being out of broker dealer compliance can have damaging consequences for a firm. Non-compliance with FINRA regulations can lead to disciplinary actions that could include an investigation. Violators may be fined, suspended, and even banned from working as broker-dealers. 


The Importance of Specialized Auditors in FINRA Compliance

The role of an independent auditor is vital in helping broker-dealer firms maintain FINRA compliance. At Assurance Dimensions, we understand the scrutiny public companies face in the securities industry. Our firm is registered with the Public Company Accounting Oversight Board (PCAOB), and we understand the complexities of broker-dealer and PCAOB audits. Contact us today to learn more about our audit and assurance services.