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PREPARING FOR A REGULATORY EXAM

Regulatory Branch Exams are now a routine component of the FINRA BD Examination program.

RRs and their supervisors should be ready for a regulatory exam at any time, because advance notice is not always made.

The following slides provide guidance designed to assist the branch representatives in their preparation for an examination.

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Prepare the Physical Office

Take a hard look at your office from the eyes of someone whose sole responsibility is to assess compliance with rules and regulations designed to protect the investing public. Is customer non public information safely out of sight of unauthorized

persons? Would the entity’s regulatory status (BD affiliate, member SIPC, etc.) be

adequately disclosed first-time visitor Are all brochures, prospectuses, signs and resources up to date

Consider and plan for a workspace adequate for two examiners for 2-3 business days (or more!)?

Plan to manage the demands of a regulatory audit AND your day-to-day operations? Assign a ‘record explainer’ Develop an ‘exam-day’ calendar

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Prepare the Virtual Office

Anticipate that FINRA examiners will have a solid working knowledge of electronic systems including email, backups, user profiles, file protocols, security measures, etc.

Be prepared to describe each electronic device in terms of: The BD’s procedures for use of business devices. Who has access to the device. What is the % business vs. personal use. How is the device secure from unauthorized access. Is non-public customer data accessed from or stored on the

device?

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Prepare the Model Office

In testing your compliance, regulatory examiners will review both the BD’s rules and FINRA’s record keeping rules.

Read and understand the BD WSP – if you have any questions, ask the CCO.

Participate in all BD compliance initiatives, including disclosures (OBA, PST, COE, etc).

Establish and sustain a culture of compliance at the branch level.

Remember – “if you did not document it, you did not do it” (make a commitment to documentation!)

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Prepare to Comply – Misc. Tips

Before the audit gets underway, collect a business card from each examiner, and contact the BD CCO to verify the identity.

To the extent possible, answer each question with a document or documents that demonstrate compliance.

Before answering any request, picture the document or evidence you will provide.

Be truthful, honest and accurate at all times.

Retain a copy of every document you provide to the examiners.

Keep lines of communication open with the BD CCO.