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FINRA Issues Sweep Letter on Cultural Values of Broker-Dealers
Practical Law Legal Update w-001-4651 (Approx. 3 pages)
FINRA Issues Sweep Letter on Cultural Values of Broker-Dealers
by Practical Law Corporate & Securities
| Published on 24 Feb 2016 • USA (National/Federal) |
The Financial Industry Regulatory Authority (FINRA) issued a sweep letter to specific broker-dealers asking them to provide information on how their firms establish, communicate, and implement cultural values.
On February 18, 2016, the Financial Industry Regulatory Authority (FINRA) issued a sweep letter to certain broker-dealers asking them to provide information on how their firms establish, communicate, and implement cultural values. The request is part of FINRA's new focus on firm culture, which was one of its examination priorities for 2016 (see Legal Update, FINRA Publishes 2016 Regulatory and Examination Priorities).
The letter asks the targeted firms to submit the following information to FINRA by March 21, 2016 (or indicate instances where the requested information is not available):
- A summary of the key policies and processes by which the firm establishes cultural values.
- A description of the processes employed by executive management, business unit leaders, and control functions in establishing, communicating, and implementing the firm's cultural values.
- A description of how the firm assesses and measures the impact of cultural values, and whether this has made a difference at the firm in achieving desired behaviors.
- A summary of the processes the firm uses to identify policy breaches, including the types of reports or other documents the firm relies on, in determining whether a breach of its cultural values has occurred.
- A description of how the firm addresses cultural value policy or process breaches once discovered.
- A description of the firm's policies and processes to identify and address subcultures within the firm that may depart from or undermine the cultural values set out by its board and senior management.
- A description of the firm's compensation practices and how they reinforce the firm's cultural values.
- A description of the cultural value criteria used to determine promotions, compensation, or other rewards.
As part of its review, FINRA will also meet with executive business, compliance, legal, and risk management staff of the targeted firms to discuss their cultural values. The goal of FINRA's review is to:
- Better understand industry practices.
- Determine whether firms are taking reasonable steps to properly establish and implement their own cultural values within the firm.
Following its review, FINRA plans to develop potential guidance for the industry and determine additional steps that can be taken to improve firm culture.