Navigating FINRA Compliance: 5 Key Pillars for Financial Professionals

by Nov 6, 2023

Navigating FINRA Compliance: 5 Key Pillars for Financial Professionals

Nov 6, 2023 | Blog, KYC, News & Events

With the financial sector moving faster than ever and encountering more unique circumstances due to decentralized competition at the helm, regulatory oversight has become paramount to safeguarding the integrity of the financial markets and protecting investors. The United States’ Financial Industry Regulatory Authority (FINRA) organization has become extremely vital to monitoring security firms and professionals, and ensuring compliance with ethical and responsible practices.

Below, we’ll take a closer look at 5 of the main principles asserted by FINRA, and why compliance is important. Read on to learn more.

Registration and Licensing

FINRA’s mandates enforce registration and licensing for a wide range of financial professionals including brokers, dealers, and investment advisors in a bid to ensure ethical practices and legal activity. Being verified as a documented professional helps to make sure that individuals and entities engaging in securities-related activities are qualified, competent, and accountable.

Registration and licensing processes are designed to confirm an individual’s qualifications, knowledge, and adherence to regulatory standards, and to foster a foundation of trust and transparency for clients in doing so.

Aligning Investments with Client Needs

One of the core principles of FINRA compliance is the concept of suitability and acting in client interest. Financial professionals are required to recommend investments that are suitable for their clients’ unique financial objectives and risk tolerance. Suitability requires that brokers and advisers can prove that they had a reasonable basis to believe their recommendations do in fact align with their client’s goals and that they are seeking to work in their best interest. This accountability is particularly important as it helps to protect clients from being exposed to unnecessary risk and that their investments are safe in the hands of financial advisors.

Safeguarding the Financial System

The prevention of money laundering and other illicit financial activities have become a prevalent issue for global security, and are a top priority for FINRA. AML compliance requires securities firms to establish robust programs and procedures for detecting and reporting suspicious activities as quickly as possible. These KYC (know your customer) measures verify identities and track large cash transactions to serve as a first line of defence and a valuable roadblock to circumventing criminal activity.

By implementing AML measures, FINRA aims to create a more transparent and secure financial environment, and prevent criminals from illicitly moving funds to support crimes like trafficking, weapons dealing, terrorism, and more.

Fairness and Transparency

Much as professionals are required to be licensed and registered to promote fairness and transparency, so to operational practices expected to adhere to ethical values. FINRA closely monitors sales practices, advertising, and customer communications to ensure they are accurate and balanced. Professionals and firms must provide clients with truthful and complete information about investment products and services. Without such transparency, the risk of fraudulent activity and the breaking of customer trust becomes significantly higher.

A Trail of Accountability

Proper record-keeping and reporting are vital for regulatory compliance and accountability within the securities industry. Businesses and institutions must be prepared to show proof of their compliance, and FINRA regulations mandate that securities firms maintain comprehensive records of their business activities, including client transactions, communications, and other relevant data. Compliant businesses must also maintain such records for specific period of times, and must be able to present them in the case of an examination or audit.

At iComply, we know digital security protocols are essential for FINRA compliance, and for preventing the advancement of criminal activity in the financial sector. Our modular suite of KYC, KYB, and AML products not only ensures you have everything you need to manage and maintain a wide range of jurisdictional KYC regulations and conduct risk-based assessments but also automates your customer identification and risk screening processes more intuitively than ever before.

Book a demo with our team today to learn more about iComply’s compliance solutions and discover how iComplyKYC can be customized to fit the unique risk screening needs of your organization.


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