The FINRA Examination Team: The Ins and Outs of FINRA’s Annual Program

FINRA's Examination team carries out a core function of FINRA's business by examining every member firm at least every four years and as often as annually, depending on the risk profile of each individual firm. These exams ensure firms remain in compliance with FINRA rules and federal securities laws and regulations and are at the heart of FINRA's mission of investor protection and market integrity.

On this episode, Michael Solomon, Senior Vice President of Examinations, Nicole McCafferty, Vice President of the Retail Exam Firm Group, and Joe Sheirer, Vice President of the Office of Exams, join us for a deep dive into how the program works and what firms can expect during routine firm exams.

Resources mentioned in this episode:

Episode 127: FINRA’s Risk Monitoring Program

Episode 60: National Cause and Financial Crimes Detection Programs

Reg Notice 23-08: Selling Private Placements

2023 Report on FINRA’s Examination and Risk Monitoring Program

Listen and subscribe to our podcast on Apple Podcasts, Google Podcasts, Spotify or wherever you listen to your podcasts. Below is a transcript of the episode. Transcripts are generated using a combination of speech recognition software and human editors and may contain errors. Please check the corresponding audio before quoting in print. 

FULL TRANSCRIPT

00:00 - 00:31

Kaitlyn Kiernan: FINRA's Examination team carries out a core function of FINRA's business by examining every member firm at least every four years and as often as annually, depending on the risk profile of each individual firm. These exams ensure firms remain in compliance with FINRA Rules and federal securities laws and regulations and are at the heart of FINRA's mission of investor protection and market integrity. On this episode, three leaders from FINRA's Exam program join us for a deep dive into how the program works and what firms can expect during routine firm exams.

00:31 – 00:40

Intro Music

00:40 - 01:05

Kaitlyn Kiernan: Welcome to FINRA Unscripted. I'm your host, Kaitlyn Kiernan. I'm pleased to welcome three guests from FINRA's Exam team back to the show to tell us all about FINRA's Examination program. Joining us today are Michael Solomon, Senior Vice President of Examinations, Nicole McCafferty, Vice President of the Retail Exam Firm Group, and Joe Sheirer, Vice President of the Office of Exams. Michael, Nicole and Joe, welcome back to the show.

01:05 - 01:05

Joe Sheirer: Thank you.

01:05 - 01:06

Michael Solomon: Thanks, Kaitlyn.

01:06 - 01:07

Nicole McCafferty: Thank you.

01:07 - 01:16

Kaitlyn Kiernan: So, to kick us off, can you each briefly introduce yourselves and tell us a bit about how you ended up in your current role with FINRA? Michael, can we start with you?

01:17 - 01:45

Michael Solomon: Sure. I head FINRA's national Exam program. We have a team of about 700 examiners and managers, primarily in four firm groupings: Retail, Capital Markets, Diversified Carrying and Clearing, and Trading and Execution. And we have some specialist teams. I rejoined FINRA last year after spending a few years in the industry and before that I was FINRA's Northeast Regional Director. I've also spent a number of years in large firms at some senior legal and compliance roles.

01:46 - 01:52

Kaitlyn Kiernan: Thanks, Michael. And then Nicole, you're in a new role since we last talked on a Reg BI podcast. So, how about you?

01:53 - 02:27

Nicole McCafferty: I have been in a new role since October 2022. I am the Vice President overseeing the Retail Examination program, which is comprised of about 250 examiners, managers and directors. So, we look at the risks overseeing all Retail firms. And prior to this, I was in National Cause and Financial Crimes Detection Programs as the Strategic Advisor. I have been at FINRA for a combined total of 14 years with some tenure in the industry as well.

02:27 - 02:28

Kaitlyn Kiernan: Joe, how about you?

002:29 - 02:56

Joe Sheirer: I've been in my current role since about January of 2020. Primarily focused now on strategic advice for the Exam program and serve as essentially Michael's deputy for the Exam program, working closely with Nicole and the other leaders in the Exam groupings. Prior to my current role, I worked in a variety of different roles at FINRA. Most recently was Regional and District Director. I also led the MAP group for a while and served in a bunch of other roles over the course of my too-long-to-state tenure at FINRA.

02:57 - 03:06

Kaitlyn Kiernan: Thanks, Joe. So, before we dig in, just to level set, Michael, what is FINRA's Exam program and what types of exams does FINRA conduct?

03:07 - 03:52

Michael Solomon: FINRA conducts its exams in our Member Supervision program, primarily two kinds of exams: cause exams by our National Cause Program and the firm exam program that we're going to talk about today. Cause exams are essentially focused on a discrete issue that comes to FINRA's attention, either by a filing made by our member firms or a reg tip or particular area that FINRA wants to focus on regarding a firm or an associated person. And the FINRA Exam program that we all work in focuses on an annual program where we examine a subset of the FINRA membership to ensure that they're complying with all FINRA Rules and federal securities laws.

03:53 - 04:01

Kaitlyn Kiernan: In the past, the firm exams that we're talking about today were known as the cycle exam process. So, what has changed?

04:01 - 04:45

Michael Solomon: The cycle exam program was at a time where we were a little more rigid in terms of the cadence with which firms were examined. And it was typically either an annual cadence or every other year or once every four years. As we've talked on a number of these podcasts, we've consistently moved to a more risk-based program. And in that regard, our Risk Monitoring counterparts that help us determine our Exam program and plan every year, do a real-time assessment of all of our 3,400 firms to determine whether they're going to get an exam each year, whether they'll have one back-to-back or whether they'll be more spread out based on the risk of that firm and how they assess that firm.

04:46 - 04:50

Kaitlyn Kiernan: And what goes into that determination on frequency?

04:51 - 05:50

Michael Solomon: Sure, there's a number of factors. So, it's both. The impact of the firm is what we call it, which is essentially the size and scale of the firm. Obviously, if a firm has a very large impact on the industry in terms of customers or potential market impact, that's a significant factor that we weigh in terms of the frequency of the exam. The other factors are the inherent risk of the firm assessed by our Risk Monitoring team in conjunction with the folks in the Exam program. And they use a number of factors to assess the risk, including the financial risk, the sales risk of a firm, operational risk, fraud risk, among other risks. They do that real time, and then they work with our folks to determine whether the risk has increased or decreased. And that will help us drive and plan for the program and determine whether a firm gets an exam that year. Maybe they skip a year or two years, or they are examined every four years based on that assessment.

05:50 - 06:04

Kaitlyn Kiernan: And we'll link to our recent podcast with our Risk Monitoring team to learn more about the risks that they look at. So, a firm that is used to being on that four-year cycle, does that mean they will only have a firm exam once every four years?

06:04 - 06:50

Michael Solomon: No, that may change. We're committed to examining every firm at least every four years. A new firm we have to examine within the first 12 months of their membership. But a firm, if they increase in their size, they take on a new business model or structure, if they add employees or registered reps, if they hire some folks with a questionable background, that may increase their risks so they may have a back-to-back exam. Likewise, if they scale back their business, become smaller or eliminates certain business lines and their risk is assessed to be reduced, they may have an exam less frequently and may change from back-to-back to a less frequent time period.

06:51 - 06:55

Kaitlyn Kiernan: Roughly how many firm exams does FINRA conduct each year?

06:55 - 07:14

Michael Solomon: Sure, it's generally in the neighborhood of about 1,000 exams a year that we cover. I should also say we do exam work for a number of the exchanges. So, part of our Exam program is doing that contractual work for exchanges, and that makes up part of the 1,000 exams that we execute every year.

07:14 - 07:19

Kaitlyn Kiernan: But that thousand does not include the cause exams you mentioned with the cause exam program.

07:19 - 07:28

Michael Solomon: That's exactly right. They execute several thousand cause exams every year based on those discrete issues that come to FINRA's attention.

07:29 - 07:40

Kaitlyn Kiernan: With a thousand exams and all these risk assessments that go into it, this sounds like it could be a complicated process. Joe, what goes into building that annual exam calendar?

07:41 - 09:33

Joe Sheirer: To some of us, it probably feels like it never stops, it's a continuous process and in some ways it really is. So, we do have a very extensive period of time, starts generally in the March time frame, to identify the firms that will be on a particular exam plan year. And a lot of things go into that throughout the course of about a six- or seven-month period where we're trying to solidify which firms will be on the plan for next year. Michael mentioned the contractual commitments that we have and some obligations under existing rules like new members. We also have commitments that are related to firm's businesses. So, if they conduct municipal business or options business, that might trigger commitments. If the firm or its employees have statutorily disqualified individuals, that factors into what goes on to the plan. And the key contributor, as Michael mentioned, is the firm's risk likelihood and impact, the assessments that Risk Monitoring does, which determines how frequently we'll consider a firm for examination.

But that process is, as I mentioned, very extensive. It runs for about six months and there's a lot of contributors to that process, whether it's the employees within the Exam program based on their prior experience with a firm, whether we need to go back in, the Risk Monitoring staff and their assessment. It's really a regulatory operations wide effort as well. We not only use Member Supervision staff, but also Enforcement staff, Market Regulation staff to help us identify which firms should be on the plan. We try to wrap up which firms are going to be on the plan by the October timeframe, and then we shift into scheduling. We factor in things like a firm's audit calendar. We don't want to go into a firm when they have their audits going on if we can avoid it. We try to coordinate with the SEC and other regulators on when they might be going into a firm to avoid overlap. We have to manage our own staff and resources and conflicts. Examiners do not work on one exam at a time generally, so there's a lot of moving parts to this and that's why it's such an extensive process.

09:34 - 09:39

Kaitlyn Kiernan: We're not even halfway through the year, but you are already thinking about 2024.

09:39 - 09:40

Joe Sheirer: Yes, we are.

09:40 - 09:43

Kaitlyn Kiernan: How do you determine what each exam looks at?

09:43 - 10:51

Joe Sheirer: What we try to do is tailor each exam to the individual circumstances of the firm that we're examining and the groupings. So, there is some work done at the grouping level, whether that's in Nicole working with her counterparts in Retail or the other group leaders working with their counterparts and responding to try and understand what's going on for that set of firms or subset of firms. When you're thinking about the subgroups to try and identify trends or issues that might be a focus priority that otherwise wouldn't be from our typical routine operations. We do try to take a look at what's going on in the industry, either things that we've seen from a trends perspective, things that are evolving, working with other groups within Member Supervision and FINRA more broadly to identify evolving issues.

But a lot of that comes from signals that are in the annual Exam and Risk Monitoring Report and then work that we're doing between Exam and Risk Monitoring and other teams to identify things that are cropping up. For example, off-channel communications is an area that has come to the forefront for a lot of us, both on the regulatory side and the business side, with recent cases from the SEC and FINRA on off-channel communications. So, that's an area of focus that has always been part of our program, but we're emphasizing more this year.

10:52 - 10:55

Kaitlyn Kiernan: So, there's no template, each exam is pretty tailored.

10:56 - 11:19

Joe Sheirer: Absolutely. There's some commonality when you're thinking about a firm in a particular subgrouping and you compare it to another firm in that same subgrouping, the exams will have similar looks and feels, but there's always nuance to the specific circumstances of the firm, our history with that firm in terms of findings, what's evolving with that firm and even within subgroupings, firms are not identical from one firm to the other.

11:19 - 11:32

Kaitlyn Kiernan: Thanks, Joe. And then, Michael, the pandemic drove a major shift in the Exam program with the vast majority of exams going remote for a few years. Where are we now without the programs running?

11:32 - 12:43

Michael Solomon: You're right. We ground to a halt in terms of our spending time onsite in March 2020. Last year, as COVID began to recede, we began to go onsite more frequently on our exams, and we're ramping that up pretty substantially this year. We're taking a different tack, though. Prior to COVID, essentially every exam had an onsite portion, some longer than others. Now we're assessing each exam individually to determine what the utility is for going onsite based on what reviews we've scoped in on those exams, based on the risk or impact of the firm itself or what we learned during the course of the exam may warrant us to spend some time onsite or if we think the exam may be more efficient onsite.

So, we're spending more time onsite, although the amount of time we spend onsite will definitely be less. I think the days of us camping out at a firm for a week or two weeks and then returning for a long period are behind us given the amount and the ability to obtain things remotely and through firm Gateway and not having to sit with boxes as we did years ago.

12:44 - 12:48

Kaitlyn Kiernan: And Nicole, what does an Exam team look like and how do you build out that team?

12:49 - 13:53

Nicole McCafferty: Exam teams are really going to look different depending on the size and complexity of a firm. We may have a newer examiner that was hired during the pandemic that has never been onsite. So, we may have an additional individual on the team that's getting that on-the-job experience. But generally, exams are staffed with anywhere between one examiners to a whole team of maybe five plus examiners, just depending on what a firm looks like, how many business lines they have. Maybe we have specific requirements like a municipal component, where we'd add a specialist team that may also need to be part of that examination group as well. So, there could be multiple specialist teams working on an exam at the same time. But overall, we're looking at what do we expect to cover on that firm exam and staffing accordingly. Clearly, we may start an exam and realize the firm has dovetailed into a business line that we may not have been aware of initially. So, that may require adding exam staff mid-flight.

13:53 - 14:01

Kaitlyn Kiernan: And do you ever pull in specialists from the National Cause and Financial Crimes Detection Program team, such as the AML or cybersecurity specialists?

14:01 - 14:19

Nicole McCafferty: Yes, we do certainly do that as well. And that could be on a consultative basis. Or maybe they're just assisting the exam team or maybe the risks that we've identified are more broad based, where the expertise of a group like that would be beneficial to have the examiner actually on the risk review itself.

14:20 - 14:23

Kaitlyn Kiernan: And how do you determine how to structure an exam?

14:24 - 15:13

Nicole McCafferty: Similarly to Risk Monitoring, Examinations is structured the same way, so each firm is assigned to a firm grouping, but also a subgroup within each grouping. So, as one example, there is a Public Pooled Investments and Variable Annuity subgroup. So, when we're structuring that exam, our exam teams are structured in that subgrouping mechanism as well. So, our team for an exam like Public Pooled Investments and VAs would include individuals that are primarily conducting examinations of those types of firms. So, we're looking at that pool of individuals that are designated in that subgroup and they're working alongside the Risk Monitoring counterpart to develop the exam scope and execute on the risks.

15:14 - 15:23

Kaitlyn Kiernan: So, exams are a lot of work for FINRA and for the firms. What does FINRA do to approach these exams consistently and efficiently?

15:24 - 16:38

Joe Sheirer: Well, we love policies and procedures when we're doing exams, so we actually have them for ourselves as well. And we try to create a framework for our exam teams to approach each exam that's consistent across the groupings but allows for that flexibility and tailoring that Nicole was talking about at the grouping and subgrouping level. And to just build on that, when an exam starts, we have particular sets of policies that talk about how an exam team should approach identifying risks, working with Risk Monitoring, collecting information from firms. There's guidance on what types of information and requests, depending on what types of reviews or potential review areas our staff are considering for a firm.

And that concept of the framework of 'here's the things that you should be considering and how to run through that,' applies throughout the whole process from risk identification for a firm exam to the execution of a firm exam. And even on the back end, when you're disposing of findings or potential findings, there's frameworks for assessing those things consistently across the exam program. So, we try to have the framework for staff to operate in and then give them the flexibility to operate based on what they learned throughout the course of the exam. So, it's really about having that framework and then applying that framework within the particular circumstances.

16:39 - 16:45

Kaitlyn Kiernan: And what can firms do to create a smoother process during the exam?

16:45 - 18:21

Joe Sheirer: It's similar to what we encourage our own staff to do, which is communicate. And when you have a potential concern as a firm on a request that a staff person has given you, either because you don't understand it or the timeframes that you're being asked to produce it in, or you think you know what you're being asked to produce, but you're not exactly sure, that's a really great point for communication. If you think you're going to have a challenge producing it or if you don't have the thing that we are asking for, really would encourage firms to communicate that as quickly as possible to the exam staff so we don't wait for the clock to run out on a particular request to then learn that the firm didn't have it or didn't understand it. We encourage staff to have regular check points with firms throughout an exam to talk about open request, talk about issues that are surfacing, and those are great points for firms to raise those kinds of questions and issues. But I wouldn't wait for those to happen.

The second you get a request that you don't maybe understand, or you need some further clarification on, raise it right then, don't wait for those meetings. Don't wait for the staff to follow up. And I think that goes a long way to helping through the process. And I would just add, if you don't think you're getting enough information, ask. The teams are consistently willing to have those conversations. As I mentioned earlier, there's a lot of exams going on and examiners are often working multiple exams. So, if they lose a little track of communicating with the firm, please reach out. And I know sometimes it feels better not to ask the question of an exam what's going on if you haven't heard from an examiner in a while, but I would encourage you to reach out if you're feeling like you're not getting the level of communication you need.

18:21 - 18:32

Kaitlyn Kiernan: Thanks, Joe. So, on that theme of communication and firms reaching out, how often is FINRA initiating communication with firms during the course of an exam, and how has that changed?

18:33 - 19:23

Joe Sheirer: It's very frequent. It certainly starts when we make our initial request to the firm to let them know that it's happening, and the exam is starting and it continues throughout. We really encourage staff to have a dialogue with the firm whenever they're making requests and not just submit a written request so that they can have those discussions around context. We also ask exam directors, which is the second level manager, to reach out to firms at the midpoint of an exam to understand what from the firm's perspective, how's it going? And we can share from our perspective how it's going either in terms of responsiveness or issues spotted. So, throughout the entire exam, we're encouraging dialogue and discussion, including when we find an issue and we really want to make sure firms are aware what those issues are and have a chance to explain and or address them before we get to the very back end of an exam where we might be citing something that could have been addressed earlier through conversation.

19:24 - 20:09

Nicole McCafferty: I would echo everything Joe says. And, in addition, I would say we encourage our Exam teams to set up regular cadence meetings with firms, and that can vary depending on the size or complexity of the exam. But if a weekly meeting makes sense to run through all of the open requests with the firm, that is something that we encourage staff to do. And if you're not getting that from the lead examiner as a firm, you should certainly feel okay with reaching out to the lead or the manager and asking, "Can we meet weekly or biweekly just to go through open requests, clarify things?" All of that level sets the expectations on both ends for what's going to be produced from a request perspective.

20:09 - 20:33

Michael Solomon: Communication between the exam teams and the firms is one of our priorities this year with the ubiquity of texting and email, people have sometimes forgotten the value of picking up the phone and having a verbal communication. So, we're really stressing that with the team to do that before they send out a request and to have those communications verbally, you can solve some things without multiple back and forth emails or communications through firm Gateway.

20:34 - 20:37

Kaitlyn Kiernan: So, what happens at the end of an exam?

20:37 - 22:14

Joe Sheirer: There's an extensive review process for each exam the managers and or second level managers, the exam directors are reviewing the work product of the staff to determine whether there's any potential issues that need further exploration. But once that's done, there's a determination on whether each issue warrants a finding or can it be disposed of differently as another finding, meaning it's de minimis and or the firm has addressed it. So, it doesn't need to appear in an exam report. But there's that extensive review process that managers and or directors go through with the staff to evaluate the total exam experience. And then we cite those issues that are rule violations. We have a preliminary findings report that is shared with the firm to identify those issues, which ideally were already discussed with the firm when they were first identified through the exam process.

So, that's an opportunity for the firm to see it in writing, to assess whether they have any additional information. Then we move from that to a final exam report and the firm is required to respond to that exam report, which would be the rule violations. And then after that response, staff does an assessment to determine if any of those issues should be considered for formal action. Most exams do not end in formal action, but there is some exams that do, and that goes through its own separate and extensive process. But the basic nuts and bolts are the issuing that exam report, giving the firm a chance to respond and assessment of that response. And then there's a second layer to that that occurs afterwards where we're assessing how to follow up on those issues for corrective action with the firm.

22:15 - 22:25

Kaitlyn Kiernan: So, you mentioned it's not every exam, but for the exams where something is referred out to Enforcement as a formal action, how do you make that determination?

22:25 - 23:20

Joe Sheirer: It's really a collaborative determination between the Exam team and our Enforcement colleagues. So, staff follows a process. We call it the collaborative consultation process, where any potential exception is brought to Enforcement and we collectively decide how to dispose of those particular issues. There's also separate processes. We have exception guidance groups for particular business activities or product areas that we have experts from around the regulatory operations program who weigh in on findings or potential findings, and they may indicate issues that warrant formal action through that process. And separately, we have some written guidance that staff can follow to determine in particular circumstances that are very commonly encountered whether the facts warrant considering formal action. But anything that's considered for formal action has to go through that collaborative consultation process.

23:21 - 23:28

Kaitlyn Kiernan: And Nicole, how do you work to ensure consistency in the types of matters that are referred to Enforcement?

23:29 - 24:26

Nicole McCafferty: So, Joe mentioned the collaborative consultation process, so that looks at findings all across all firm groupings. We also do have matrices that help staff look at facts and circumstances and weigh whether something may be deemed formal or not, and that would determine whether or not they would send the particular findings to collaborative consultation. Joe also mentioned the exception guidance group, so not all findings go through an exception guidance group, but there are certain topical areas like Reg BI where we do have a group set up that actually looks at every single exception cited related to Reg BI, whether it's formal or not, to make a determination. Are we being consistent with how we're citing the rules as well as are we being consistent across firm groupings, across different types of firms for things that are being referred to Enforcement?

24:27 - 24:34

Kaitlyn Kiernan: Have you noticed a difference in the level of consistency since FINRA shifted to the firm grouping model from a regional model at the beginning of 2020?

24:35 - 25:08

Nicole McCafferty: Yeah, the process becoming more centralized from both an Enforcement perspective as well as a firm grouping perspective has really helped us to become more consistent in that way. So, I think that that will continue to be the case going forward. And I mentioned these exception guidance groups. It's not just Reg BI, as we identify areas that maybe there's gray area or there's a lot of focus on it from the industry, we can add or remove exception guidance groups as we see necessary.

25:08 - 25:23

Kaitlyn Kiernan: Thanks, Nicole. And Joe mentioned that the vast majority of things are not formal action. They're cited as deficiencies. So, how does the Exam team follow up on the deficiencies cited at the end of the exam?

25:24 - 26:49

Nicole McCafferty: It's really going to depend on the type of finding. For run of the mill findings that are not going to Enforcement that are disposed of either through no further action or cautionary action, potentially, we may follow up directly with the firm if they need to amend procedures and they've done that already, they can provide it to the Exam team and that goes along with the file. If something is going to take a little longer to fix, we may follow up by testing, opening up another exam, a cause exam, or if the risk is low enough, we may follow up on that particular finding on the next exam. But it's going to be really dependent on the nature of the finding itself. So, some cases will require validation at some point after an exam and other ones we can wait a little bit longer until the next exam. But overall, I would just say it really benefits a firm to remediate exceptions quickly. So, if an Exam team is bringing something to your attention mid-exam, it will mitigate, potentially, the impact of that finding if that's remedied more quickly. So, I'm not saying every time an exception is remedied mid-cycle, it's going to result in no further action. It is going to depend on the risk of the exception that we cited, but it does speak to the level of compliance culture at the firm when you're taking that action more quickly during the exam.

26:50 - 27:01

Kaitlyn Kiernan: Thanks, Nicole. Earlier, you mentioned pulling in folks from the specialist teams, but how does FINRA's Exam team collaborate with other groups within Member Supervision and the organization as a whole?

27:02 - 28:44

Nicole McCafferty: There's a lot of collaboration in Member Supervision. I'll start by just outlining the structural changes that have been made in the last six months. There's now an officer-level person over each of the firm groupings, so that's somebody in Exams that would be me for Retail. And then I have a counterpart in Risk Monitoring that's also an officer that oversees the Retail Risk Monitoring. So, we collaborate very closely and each of the firm groupings, we each have that counterpart where we're in lockstep on the priorities for each of our groupings. There's also a lot of touch points across other groups like our National Cause program, our Membership Application Programs, Complex Investigations and Intelligence—they identify emerging trends and risks that they will loop Exams in on, so that we’ll be more proactive in identifying these things as we start our exams.

Other groups, aside from just those in Member Supervision that we collaborate with, and there are many, but I'll just mention two: One is Corp Fin, our corporate finance group that looks at private placements, 5123 filings. That is something, at least I know in the Retail space, we lean heavily on Corp Fin to have done their due diligence on filings that are coming into FINRA. We also lean on advertising. So, New Members is an obvious one when they're filing all of their new advertising, their websites, etcetera. But we will occasionally identify advertising pieces that we may rely on advertising for their expertise and send them the piece that we've identified in our examination.

28:44 - 29:00

Kaitlyn Kiernan: Great. Thanks, Nicole. And a quick plug for the new Reg Notice on private placements for firms who may have missed that. But now just to wrap up, what do you think it's most important for firms to walk away knowing about FINRA's Exam program?

29:01 - 29:42

Michael Solomon: I can start. We've talked a lot in this podcast about how the Exam program has evolved to be risk-based and we really want to focus on the right things in exams. So, the more a firm can provide current and quality information to their Risk Monitoring Analyst that's assigned to that firm, the better we will be at tailoring the exam to be focused on the real risks. We don't want to spend more time than we need to on an exam, so the better the relationship, the more information firms can provide to Risk Monitoring, the better their information will be to Exams for us to decide whether to actually have an exam in a particular year and what to focus on.

29:43 - 29:53

Kaitlyn Kiernan: Thanks, Michael. And again, check out the show notes for the link to our Risk Monitoring podcast for more about how you can develop a relationship with that team. Joe or Nicole, anything to add?

29:54 - 30:15

Nicole McCafferty: I would just add, we're not looking to ding a firm for every little technical violation. We're focusing on risks at a firm. So, Joe mentioned earlier, the vast majority of our firms with findings don't have findings that end up in Enforcement. Really, it is very beneficial to a firm to correct those exceptions before the end of an examination.

30:16 - 31:14

Joe Sheirer: This is probably selfishly for my own role here at FINRA, I really want firms to know that we're focused on continuously improving the Exam program: how we leverage data, what process or techniques we use to conduct exams, what are our areas of focus? How do we continuously improve our knowledge and our staff's knowledge of the industry and the regulations that they're examining for? And that's not just lip service. We really want to get better all the time, and we want to hear the feedback from firms about how we're doing things and how we can get better. So, when we're talking to you at a midpoint call with an Exam Director asking you how's an exam going or what could be going better, or here's what we think could be better from a financial perspective, we really want that to be a dialogue and a discussion because we use that information to constantly evolve the Exam program. So, any chance that you have to give us feedback, we genuinely want to hear it and incorporate it. Doesn't mean we're going to take all the suggestions or feedback we certainly can’t, but we do take the feedback and consider it as part of the broader continuous improvement we're trying to make to the Exam program.

31:15 - 31:45

Kaitlyn Kiernan: Well, that's it for today's episode. Michael, Nicole and Joe, thank you so much for joining me to shed light on FINRA's Exam program and all of the stuff happening behind the scenes for our listeners. If you have any questions on today's episode or ideas for future episodes, you can email us at [email protected]. If you don't already, be sure to subscribe to FINRA Unscripted wherever you listen to podcasts so you never miss an episode. Today's episode was produced by me, Kaitlyn Kiernan, engineered by John Williams and coordinated by Hannah Krobock. Until next time.

31:45 – 31:50

Outro Music

31:50 - 32:18

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