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Business Process, Managed Accounting, Support

Ensuring FINRA Compliance in the Digital Age

Posted on September 20, 2023

By Stephen Solt

May 24, 2024

The financial industry, with its intricate web of transactions, vast sums of money, and sensitive data, operates under a microscope of scrutiny. Adhering to regulatory standards ensures that firms operate transparently, ethically, and in the best interests of their clients. This is why compliance, in this context, is not just a set of rules to follow but a foundational pillar that supports the industry’s integrity. One of the most significant regulatory bodies in the U.S. financial sector is the Financial Industry Regulatory Authority (FINRA). FINRA compliance is not just a legal obligation but a crucial aspect of maintaining trust in the financial industry. However, the financial industry is undergoing a rapid digital transformation. With these advancements come new risks, especially in cybersecurity and data privacy. So how can you ensure FINRA compliance in the digital age? With vast amounts of reporting and record-keeping online, what steps can you take to ensure your data doesn’t fall into the wrong hands?

Balancing Efficiency with Security in Financial Record-Keeping & Reporting

Record-keeping is the backbone of transparency and accountability in the financial industry. Proper records ensure that firms can validate their operations, decisions, and transactions, fostering trust with clients and regulators. FINRA requires firms to maintain specific records for a designated period. These include trade confirmations, customer account information, communications related to the business, and more.

FINRA compliance also mandates that registered firms and individuals regularly submit specific reports to ensure transparency and maintain market integrity. Maintaining proper record-keeping makes compiling and submitting these reports, which provide insights into a firm’s financial health, operations, and potential risks, much easier.

With the proliferation of digital tools, many firms have transitioned from paper to electronic records. While this shift offers benefits like easy retrieval and reduced physical storage needs, it also introduces risks such as data breaches and unauthorized access. Firms must invest in robust digital record-keeping or reporting systems that not only streamline their operations but also fortify their FINRA compliance infrastructure by providing:

  • Access Control: Limits access to the reporting system to only those who need it and implements role-based access controls to restrict what each user can see and do.
  • Multi-Factor Authentication (MFA): Ensures that only authorized personnel can access the reporting system.
  • Data Encryption: Protects sensitive data both in transit and at rest.
  • Firewalls and Intrusion Detection Systems: Monitors and controls incoming and outgoing network traffic.
  • Regular Backups: Prevents data loss due to unforeseen events like system failures or cyberattacks.

And remember: having robust policies and procedures in place is not enough. Firms should document these protocols and ensure they are applied consistently across the organization. Regular reviews and updates can help keep these documents relevant and in line with regulatory changes.

Your FINRA Compliance Cybersecurity Checklist

The financial sector, with its vast troves of sensitive data, is a prime target for cybercriminals. Breaches can lead to financial losses, reputational damage, and loss of customer trust. In this digital age, financial institutions must stay ahead of potential threats and ensure they’re adhering to the highest standards of security and regulatory compliance. With the increasing complexity of cyber threats and the stringent requirements of FINRA, it’s no longer sufficient to have just basic security measures in place.

Below, you’ll find our brief checklist to help you get started:

  • Perform Vulnerability Scans: Partner with a third-party vendor who can provide regular scans for any network vulnerability and help remediate them.
  • Install Malware Protection: Malware can leave your data susceptible to prying eyes. Malware protection tools will help detect and block viruses.
  • Perform Patch Maintenance: Software developers release regular patches when known vulnerabilities occur. Maintain the latest security controls by regularly updating your software.
  • Limit Access: Access controls will restrict confidential information to certain admins.
  • Block External Storage: Prevent employees from using flash drives or other external storage devices that could lead to the unauthorized sharing of confidential data.
  • Perform Backups: It’s a best practice to have onsite and offsite backups in case the worst, from fires and floods to cyber-attacks, occur.
  • Block Outside Systems: Network access controls like firewalls can block your internal systems from connecting and sharing data with outside systems.
  • Install Endpoint Malware Protection: Endpoint malware protection is another layer of security to prevent viruses.
  • Provide Regular Training: Security Awareness Training helps employees stay up-to-date on the latest dangers and best practices. Help them spot the signs of phishing emails and teach them who to report to should they suspect data is compromised. Empower your employees to all be cybersecurity advocates.
  • Review Your Policies & Procedures: Cybersecurity is constantly evolving. Your policies and procedures should, too.

Safeguarding the financial sector from cyber threats is an ongoing and ever-evolving challenge. The stakes are high, with both tangible and intangible assets at risk. By proactively implementing these measures, institutions can fortify their defenses, protect their reputation, and instill confidence in their clients.

Want to learn more? Book a meeting with us today!

FINRA Compliance with KDG

As firms navigate the vast expanse of digital assets, ensuring compliance becomes an increasingly intricate task. The challenges are manifold, but no firm should have to face them alone. At KDG, our award-winning technology management team will support you every step of the way. From backups and software updates to comprehensive training, from installing robust malware protection and firewalls to conducting thorough network reviews, we ensure that your firm remains compliant with FINRA regulations. Moreover, we offer a free IT network security assessment to help you identify and address potential vulnerabilities. Don’t navigate the complexities of FINRA compliance in isolation; let KDG be the trusted partner by your side, ensuring a secure and compliant digital future for your firm.

Steve Solt headshot

Stephen Solt is a Senior Accountant at KDG. With his eye for detail, his ability to problem solve, and his dedication to customer service, he’s helped numerous businesses see their financial futures clearly.

Want to learn more? Book a meeting with us today!

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