SEC Orders FINRA to Improve Internal Compliance Policies and Procedures

October 27, 2011

The SEC ordered the Financial Industry Regulatory Authority (FINRA) to hire an independent consultant and undertake other remedial measures to improve its policies, procedures, and training for producing documents during SEC inspections.  According to the SEC’s order instituting settled administrative proceedings, certain documents requested by the SEC’s Chicago Regional Office during an inspection were altered just hours before FINRA’s Kansas City District Office provided them.


The SEC found that on August 7, 2008, the Director of FINRA’s Kansas City District Office caused the alteration of three records of staff meeting minutes just hours before producing them to the SEC inspection staff, making the documents inaccurate and incomplete.  The production of the altered documents by the Kansas City District Office was the third instance during an eight-year period in which an employee of FINRA or its predecessor (National Association of Securities Dealers) provided altered or misleading documents to the SEC.

FINRA consented to engage an independent consultant within 30 days that will:

  • Conduct a one-time comprehensive review of FINRA’s policies and procedures and training relating to document integrity.
  • Assess whether the policies and procedures and training are reasonably designed and implemented to ensure the integrity of documents provided to the SEC.
  • Make recommendations for the enhancement of FINRA’s policies and procedures and training as may be necessary in light of the consultant’s review and assessment.

Click here to access this order.


Categories

Enforcement Actions, Exchange-Traded Funds (ETFs), Investment Advisers, Investment Companies