What Does FINRA Expect from Broker-Dealers During an Audit?

There is essentially three things FINRA will demand during an audit:

One: Reproduce the communications made from registered reps to clients. The key here, especially for small firms is to first clearly define through a communications policy what method reps will use to work with client. For example, if the policy defines email and Facebook, then only electronic records stored on these systems need to be supplied to auditors.

Two: Reproduce data relating to Books and Records. This data can be in any format depending on the systems used by the firm, but will be contained in:

Trade Blotters

Asset and Liability Ledgers

Income Ledgers

Customer Accounts

Order Tickets

Trade Confirmations

Trial Balances and various other related documents

Many of the records, including communications that relate to the broker-dealer’s business as such, must be retained for three years; certain other records must be retained for longer periods

Three: Documentation. And finally, firms will need to provide the following documentation to FINRA in order to satisfy SEC Rule 17a-4: The Two FINRA third party storage notification letters from the FINRA designated third party provider (D3P), the agreement from the D3P and the firm, and a business continuity plan outlining how the firm will recovery from a minor or major disaster.

Allan Lonz
Allan Lonz
Allan Lonz, President and CEO of AdvisorVault is a veteran in the field with over 15 years experience providing data compliant solutions to the financial industry, especially for small firms. Recognizing that very few backup vendors understood the data compliance challenges of small broker-dealer firms, Allan created AdvisorVault - a remote backup company designed to provide his customers with a solution to ensure they meet all current rules from FINRA and the SEC. It includes all the hardware and software to remotely backup, archive and ensure disaster recovery of critical electronic records such as email, books and records and all other data at head office, branch offices and remote locations in accordance with rules 17a-3 and 17a-4. With Allan’s deep understanding of technology, compliance and finance he brings a unique mix of expertise that allows him to design a complete turn-key product. Priced at one small monthly fee, this "out-of-the-box " approach takes the burden off his customers shoulders and allows them to experience complete data compliance peace of mind simply and inexpensively.