Bates Research - 11-09-16

Regulators Preview 2017 Priorities at SIFMA’s 2016 New York Regional Conference

by Susan L. Harper, Managing Director NY/NJ


While we are still enjoying the fall weather (and now processing the post-election news), securities regulators are busy thinking about critical 2017 priorities. Regulators from the FINRA, SEC and CFTC all previewed their 2017 priorities for attendees at SIFMA’s 2016 NY Regional Conference, held last Wednesday, November 2nd, at the New York Marriott Marquis.

In some cases, the regulator simply announced the priority, while others elaborated in detail on what they would be looking for. Here is a snapshot of what to expect in 2017.


In her keynote address, Susan Axelrod, Executive Vice President of Regulatory Operations for FINRA, highlighted what the member firm regulator will be focusing on in 2017, including:

1. Know Who You Are Hiring: Employment Practices

In addition to “Know Your Customer,” a top priority for FINRA will be “Know Who You Are Hiring.” FINRA wants to make sure that firms are familiar with advisors’ disciplinary backgrounds and employment history, and will be emphasizing hiring practices in 2017. Said Axelrod to the audience, “It gives us insight into the culture of the firm. Who is responsible? Is it the onsite manager? Compliance?”

2. Having a dedicated high-risk exam team focusing on brokers with complaints

Axelrod shared that FINRA has been focusing on high-risk brokers over the past 3 years.

3. Products

FINRA will be looking closely at companies who are selling mutual funds and investment trusts. They want to make sure clients are receiving the correct discounts, and they emphasized that restoration of these amounts will help the firm avoid fines. FINRA will also be looking at the type of controls in place at the firm to catch these types of issues before they occur. While Axelrod emphasized that FINRA recognizes and rewards firms who do the right thing, she also mentioned that there was a need to focus on the conduct of individuals within those firms.

4. Culture of Compliance

FINRA has been involved in a culture review of firms (as we have blogged about previously here and here).  Axelrod discussed the importance of control functions and senior leadership involvement, including the representation of the management and executive committees, in creating a culture of compliance at firms. She relayed that it sends a message that compliance and legal are not just “check the box” functions and are part of the review.

5. Proactive Interactions with Regulators

Finally, Axelrod stressed that FINRA values the relationship with internal legal and compliance teams and appreciates proactive interactions with regulators before issues hit the news or turn into something larger.


During her enforcement remarks, Stephanie Avakian, Deputy Director of the Division of Enforcement for the SEC, highlighted a few of the agency's 2017 priorities below:

1. Complex Products

In particular, the SEC stressed their use of data analytics in connection with complex product reviews. Firms need to also think about “whether customers understand the risk of complex products,” and whether “the firm has communicated the risk to the customer,” said Avakian.

2. Insider Trading

The SEC is using data analytics to uncover whether insider trading is occurring.

It is important to note that the SEC is fully embracing the use of big data and data analytics in their review of firms and individual activities.

Additionally, expect the SEC to also scrutinize the following in 2017: 

3. The Investment Advisor space
4. Financial fraud in the Accounting space
5. Cyber Security


During her enforcement remarks, Manal Sultan, Deputy Director of the Division of Enforcement for the  U.S. Commodity Futures Trading Commission, previewed a couple of the CFTC’s 2017 priorities that include scrutiny of the following:

1. Market Intelligence (ex. manipulation)
2. Disruptive Trading
3. SWAP Data Reporting
4. Providing false information to the CFTC during an investigation
5. Customer protection – fraud or failure to disclose

Bates Research will continue covering new 2017 regulator priorities as they are announced, which may likely be impacted by the 2016 election results. For a look back at the 2016 FINRA and SEC priorities and other commentary, visit our Research page to access White Papers and weekly Blog posts. Please also join our regulatory, compliance and litigation-related conversations on Linkedin and Twitter.


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