FINRA 2018 EXAM PRIORITIES: SUITABILITY AND COMPLEX PRODUCTS REMAIN FRONT AND CENTER -

In January 2018, FINRA released its annual examination priorities letter.1 The letter addresses a variety of areas that are important to U.S. broker-dealers. However, as it has in the past, FINRA remains concerned about whether complex products are being properly sold.

According to the letter:

“As the number and complexity of products available to investors continue to increase, FINRA will continue to assess the adequacy of firms’ controls to meet their suitability obligations. This includes reviewing how firms identify products that are subject to new product vetting, the vetting process itself, and the supervisory systems and controls firms put in place to ensure personnel are appropriately educated and trained on the sale and supervision of the product and that recommendations are suitable. [footnote omitted] As part of the vetting process, firms should identify the risks associated with a product and include those risks in their product training so that registered representatives can appropriately evaluate them prior to recommending the product to a customer. FINRA will pay particular attention to suitability determinations in those situations where registered representatives recommend complex products to unsophisticated, vulnerable investors.