On January 10, 2023, the Financial Industry Regulatory Authority, Inc. (“FINRA”) published the 2023 Report on its Examination and Risk Monitoring Program (the “Report”). FINRA highlights several topics as key areas of risk for investors and the markets, including mobile apps, complex products and options, order handling/best execution, Regulation Best Interest and Form CRS, and cybersecurity. FINRA’s focus on these topics in 2023 is expected, given each has been the subject of regulatory initiatives of FINRA and the Securities and Exchange Commission (“SEC”) in the recent past. The regulators’ focus on these topics is likely to intensify with the continued fallout from the collapse of FTX and other market participants, particularly with respect to those business practices and products with extensive use by, or impact on, retail investors.
Notably, the Report also adds several new topics relating to Market Integrity, including with respect to fair pricing obligations for fixed income securities, trade reporting and order handling requirements for fractional shares, and certain aspects of Regulation SHO. Additionally, the Report includes manipulative trading as a new topic. Finally, FINRA adds new content on a wide range of topics covered in previous years.
In this Legal Update, we provide a brief overview of the Report’s new topics, as well as the new material in previously covered topics.