In recent years, the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) have heightened their expectations of what constitutes a “comprehensive” branch self-inspection program. Firms that fail to meet these expectations might receive a visit — and disciplinary action — from either FINRA or the SEC’s Office of Compliance Inspections and Examinations (OCIE). To avoid regulatory intervention and discipline, firms should implement heightened branch inspection processes and procedures.

THE REGULATORS’ EXPECTATIONS FOR A SUCCESSFUL BRANCH INSPECTION PROGRAM -

1. The Basic Rules.

Before the examiners come knocking, broker-dealers should ensure that they follow FINRA’s rules requiring firms to conduct periodic branch inspections. These rules are complex and often confusing, but following them is vital to avoid sanction.