FINRA’s Examination Program: Optimizing for the Future

FINRA's Examinations team carries out one of FINRA's core functions in the examination of FINRA member firms. In an effort to continuously improve the program, the team has undertaken changes to create efficiencies before, during and after the exam process.

On this episode, Michael Solomon, executive vice president of Examinations and the Membership Application Program, Tom Mellett and John Martino, both vice president of Firm Group Examinations, join us to detail some of the recent changes, including the introduction of thematic reviews, changes to the post-exam closeout process and more.

Resources mentioned in this episode:

Episode 132: The Ins and Outs of FINRA's Annual Program

2024 Regulatory Oversight Report

Targeted (Sweep) Exam Letters

Listen and subscribe to our podcast on Apple Podcasts, Google Podcasts, Spotify, YouTube 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 - 00:29

Kaitlyn Kiernan: FINRA's examination team carries out one of FINRA's core functions in the examination of FINRA member firms. In an effort to continuously improve the program, the team has undertaken changes to create efficiencies before, during and after the exam process. On this episode, three senior leaders from the exam program join us to detail some of the recent changes, including the introduction of thematic reviews, changes to the post-exam closeout process and more.

00:29 - 00:37

Intro Music

00:38 - 01:02

Kaitlyn Kiernan: Welcome to FINRA Unscripted. I'm your host, Kaitlyn Kiernan. I'm pleased to welcome three guests from FINRA's exam program to the show today to provide an update on their work. Joining me are Michael Solomon, executive vice president of Examinations and the Membership Application Program, Tom Mellett and John Martino, who are both vice presidents of Firm Group Examinations. Michael, Tom and John, thanks for joining me.

01:03 - 01:03

Tom Mellett: Thanks for having us.

01:04 - 01:17

Kaitlyn Kiernan: To start out, can you each give a quick overview of who you are and what you do at FINRA within the exam program? Michael, you were promoted since we last talked on the podcast, so maybe we can start with you.

01:18 - 01:42

Michael Solomon: Sure. Thanks, Kaitlyn. So, I oversee FINRA's national exam program. I've been doing that for about the last two years. I've also taken on responsibility for the Membership Application Program and our Statutory Disqualification Program, and we're really trying to get the most use out of collectively obtaining lots of information that we share across those three groups and work closely with our risk monitoring team as well.

01:42 - 01:44

Kaitlyn Kiernan: Great. And John, how about you?

01:44 - 02:01

John Martino: So, I'm in charge of our team that's responsible for executing examinations across the diversified and carrying clearing firm grouping. So, these tend to be some of our larger firms that are responsible for a number of different activities across the industry.

02:02 - 02:04

Kaitlyn Kiernan: Great. And Tom, last but not least.

02:04 - 02:23

Tom Mellett: Similar to John, I'm responsible for the firm examination program for the capital markets firm group. We examine firms in the product originator and wholesaler space, mergers and acquisitions space, and the institutional side of private placements. And we also cover funding portals.

02:24 - 02:39

Kaitlyn Kiernan: There have been some changes to the exam program in recent years. So, before we dig into more of what's new, Michael, at a high level, can you remind listeners what FINRA's exam team is and what kind of exams it encompasses?

02:40 - 03:14

Michael Solomon: The last two years or so, we've brought into Member Supervision all of the exams that used to be done in Market Regulation or Trading and Execution Exams. So, all of the exams that we do now are within one team of about 720 examiners and managers. We typically execute somewhere between 1,000 and 1,200 exams every year, where we are examining firms on a risk-based basis, where our team determines, in conjunction with the risk monitoring folks, which firms to put on the plan.

We also have certain obligations to examine firms at least every four years to make sure that we have adequate coverage, and we have touch points with the entire membership. And we examine firms to make sure they're in compliance with FINRA rules, with SEC rules, with MSRB rules, as well as rules of the exchanges. And we do conduct many exams on behalf, from a contractual basis with the exchanges. And so, firms will see us at least every four years, depending on their risk or their impact or their size.

It may be more frequent than that. But we're no longer constrained with you are an annual firm, or you are a two-year firm or you are a three-year firm. We are assessing that every year to determine which firms to focus our limited resources on.

04:00 - 04:13

Kaitlyn Kiernan: Thanks, Michael. So, you did a good job laying out some of the different exams. But the exam team also recently introduced a new type of exam review called a thematic review. What is a thematic review?

04:13 - 04:55

Michael Solomon: There's not a perfect definition, but essentially the thematic reviews that we're doing and that we will likely be doing more of in the coming years focus on a business area or a product where we see some heightened risk, or where we think firms may not be as focused as perhaps they should be, and it's an area that we haven't explored recently. So, it's a good way to compare and contrast firms' controls and procedures across similarly situated firms in a particular product or an area where we think there's a little elevated risk and we can more readily see where there are best practices that some firms are engaging in, or where some other firms may be falling short in their focus on that area.

We also think, given that we narrowly focus these thematic reviews on one particular area, that we can gather information faster and a little more nimbly than spreading them across multiple firm exams that are already in flight. So, with that, we can hopefully provide some more, faster and real time guidance to the industry in terms of Regulatory Notices or through these kinds of podcasts or through our annual report that we publish in the beginning of the year.

Lastly, I'd say by doing these across multiple firms with generally one or two management leaders over that particular thematic review, we can have a much higher level of consistency in how we execute on these exams and how we gather the information so they're a little faster way to obtain information.

05:50 - 06:01

Kaitlyn Kiernan: Our listeners are likely familiar with the term targeted review or sweep. How is a thematic review different from these other types of focused exams?

06:02 - 06:38

Michael Solomon: In my view, these are quite different. Generally, our sweep exams have been in an area where we already have a fairly good understanding that there's problematic behavior, or the controls really aren't where they should be in an area, and we publish those sweep exam letters. They take much longer because they're generally much more involved. And there's many firms before we can put out a report or make enforcement referrals, as happens with some frequency from sweep exams. So, I think the thematic exams that we're doing are a much earlier version of a sweep exam, where it may result in a sweep if we really see through the thematic exams where we target ten firms and eight of them are really well behind where we think they should be or really haven't addressed the issue.

06:48 - 07:23

Tom Mellett: With sweeps there's really more of an indication that there's a problem, and we expect that there is some type of material risk that's gone unaddressed, misconduct happening and something that's more likely to result in disciplinary action, whereas, like you mentioned, the thematic reviews are about learning. We want to see how firms are addressing an issue, potentially take back best practices that we can share out with the industry, and potentially get ahead of a problem before it persists in the industry for a long amount of time before some type of regulatory action is taken.

07:24 - 07:43

Michael Solomon: That's a great point when a firm, at least in my experience, having been on the receiving end of sweeps, when you are part of a sweep, I think you have a good sense, like you may have some real issues here with FINRA and potentially enforcement. I think if a firm receives or is part of a thematic exam we're nowhere near that assessment at all.

07:43 - 07:56

Kaitlyn Kiernan: That's good to know. I mean, I think the crypto asset sweep recently is a good example. There was a 70 percent noncompliance rate. So that showed there was definitely a clear issue. And that's why it rose to the level of a sweep.

07:56 - 08:01

Michael Solomon: Exactly. Same with the finfluencers sweep. There was a number of enforcement actions that have already come out there.

08:02 - 08:06

Kaitlyn Kiernan: And what kind of thematic reviews have you conducted so far?

08:06 - 08:43

John Martino: They really run the gamut across a number of different areas, from net capital to looking at a firm's supervisory processes over communications with the public. We've also done some work in the off-channel communication space, really understanding how firms are capturing and maintaining communications that may be done outside of the firm's approved communication platforms. We've also been looking at how firms use broker rankings, as well as looking for what could be potential misconduct or customer harm that might be directed at certain affinity groups.

08:44 - 09:27

Michael Solomon: The broker rankings one was an interesting one, because it's an area that we really haven't looked at before. Many financial advisors have a great desire to become ranked in Barron's, in Forbes' annual survey of the top advisors in a state or nationally, and there's a lot of information and data that is provided to Barron's and Forbes that they then use to come up with those rankings. So, we wanted to see what kinds of controls firms had to ensure that that data and that material and information provided to those periodicals was accurate. And there was a way to ensure that that wasn't being submitted solely by the financial advisor without really any checks and balances on the accuracy of that, which could result in somebody getting a higher ranking if some of that material was not entirely accurate.

Most firms generally had pretty good controls on that. I think there was one firm that really hadn't addressed it quite as well as they should, but it's again, an area where we really hadn't looked at before but could have some issues, and we were generally satisfied with how firms had addressed it.

09:41 - 09:57

Kaitlyn Kiernan: And John, you mentioned off-channel communications as well. I have heard that come up many, many times in the past year. At every conference, every event, people are talking about it. So, Tom, can you tell us a little bit about what you have found with that thematic review?

09:58 - 10:28

Tom Mellett: So, let me set the stage a little. So, the reason that off-channel communications was performed as a thematic review rather than a sweep was we knew there were some issues. There had already been some high-profile cases, but it's an area that we really hadn't spent a lot of time focusing on in exams because early in my career, so 15, 20 years ago, we often looked at that issue. But firms had really gotten their arms around compliance with email and the historically traditional communication channels.

But the world has changed. Customers want to use social media text message, and we really didn't have a sense of how widespread the issues were. So, we set up these thematic exams and we looked at about 70 firms who we thought were the most likely to have the circumstances that could lead to issues here. And we were looking at whether or not the firms had defined the communication channels that were permissible or not permissible, whether or not they had appropriately tailored policies and procedures that they were enforcing, and then whether or not they were monitoring to see if individuals associated with the firm were using unapproved communication channels.

So, the results were about half of the firms we looked at had no issues at all. So, they had clear policies, they had communicated them, they had reasonable procedures, they were enforcing them and we didn't find any indication that anyone at the firm was using unapproved communication channels. So, for the other half, we found a variety of issues. First, we found firms weren't always capturing the communications that their associated persons were using, in some cases in approved lanes and in other cases in unapproved lanes.

But there were indications within the firm that these communication mediums were being used. So, the firm should have and did have the opportunity to see it, and either correct the situation by having the associated person stop using those communication channels or come up with a solution to retain them. And there was a wide range of findings there, and it ranged from one-offs where there was one person or a very small amount of off-channel communications, to relatively pervasive issues where it was widespread at the firm, and we handled those differently based on the severity of the finding.

But then we also found issues with firms' procedures and the implementation of those procedures. So, we found circumstances where firms didn't have reasonably designed procedures to supervise all of the communication mediums that they permitted-so, situations where there was an approved communication channel, it was being retained, but the supervisory procedures hadn't been updated so the substance wasn't being looked at in the way that it should have. We also found circumstances where firms didn't have supervisory procedures to look out into their business to see if there were unapproved communication mediums being used.

So, we found examples where there were business cards and business oriented social media profiles that held out communication mediums like text messaging or messaging apps, which were not approved by the firm. And the firm did not respond to those red flags where they were present.

13:15 - 13:33

Kaitlyn Kiernan: That's really interesting. Thanks for sharing, Tom. And something that's striking is, John, when you were listing some of the areas you're looking at, you mentioned newsy things like off-channel communications, but you also mentioned net capital, which is pretty foundational to financial regulation. Can you tell me what you were looking at with that review?

13:34 - 14:06

John Martino: Yeah, and you're exactly right. It is very foundational and therefore an area we felt that we had an opportunity to continue to do some additional work. We took an opportunity to really do these as standalones, to work with our colleagues and risk monitoring, look at past exam history for particular firms, and identify firms where we thought there might be some benefit in going in and taking a closer look at capital compliance, as well as how the firm is managing their financial statements in books and records.

Last year, we kicked off this initiative and we selected a number of firms. We've done so again and continue that effort through the current year, and we've learned a lot from those. As we spoke about earlier, one of the benefits to doing these thematic reviews is to really look for potential common themes and trends and opportunities where we can share with the industry some of the things that we may be seeing as common areas for improvement. And I think the net capital thematic is a perfect example of that.

So, we've seen some firms where they've lacked supervisory review over various key functions, whether that's wire movements or maybe the financial reporting preparation and an extension of that has also been firms that have provided individuals that might not be associated with the firm, or even properly registered with the broker-dealer authority over their bank accounts. We've also seen inaccuracies in a firm's books and records, which have led to inaccurate financial reporting and in some cases, even net capital deficiencies.

These inaccuracies could have included things like misclassification of certain assets and liabilities, some firms that just didn't have adequate reconciliation processes, and a lot of failures around the proper accrual of certain liabilities. And then most recently, we've even seen issues related to firms' compliance with the Accounting Standard Codification, also known as ASC 606, which is related to revenue recognition, whereby firms have failed to accurately recognize revenue at the time that the service is being provided to the customer.

And then lastly, I'll just highlight in this space, we've also seen some situations where firms have not adequately outlined the allocation of expenses within their expense sharing and service-level agreements.

16:07 - 16:20

Kaitlyn Kiernan: Michael, you mentioned earlier your experience being on the receiving end of a sweep and how you expect that differs from a thematic review, but is there anything else you think a firm should know if they have a thematic review component coming up?

16:20 - 16:50

Michael Solomon: Since many of these are very focused on information gathering, we're likely to ask to have a fair amount of interviews with both the business people in a particular business unit we may be looking at, or who helped design the product, or the rollout of a product, along with the control people that are assigned to the business area or the product that we may be looking at. So that's part of the information gathering to do those sort of informal interviews with people. This isn't on the record testimony. This isn't an enforcement investigation.

It's really trying to speak to the right people who can educate the exam team on how the firm is looking at this particular issue. And then, of course, we're likely to look to see how mature the firm's written supervisory procedures are with respect to the area or the product and the training that has been rolled out, if it has been, and then we're likely to do some testing of those controls in the particular area.

17:16 - 17:27

Kaitlyn Kiernan: And just to wrap up on the thematic review topic, Tom, do you plan to provide an update to firms on what you've learned on some of these different reviews as you do following sweep exams?

17:28 - 18:02

Tom Mellett: If we find that there's not really an issue and firms are supervising appropriately and have good processes and controls in place, there might be nothing to communicate following the conclusion of a thematic review because everything is going well. Alternatively, if we see a need for guidance or to remind firms about existing guidance, we might elect to draft and issue a Regulatory Notice. But then, alternatively, we might use the annual Regulatory Operations letter as the mechanism to communicate with the industry about our learnings from a thematic review.

18:03 - 18:19

Kaitlyn Kiernan: Thanks so much for helping dig into the thematic reviews. And then another element of the exam program I wanted to talk about was efforts that you have been making to drive program efficiencies. John, can you give us an update on some of the work here that the team has been doing?

18:20 - 19:08

John Martino: Some of our exams can be of a significant size and scope, and we recognize the impact that that can have on the industry. And so, we're continually looking for opportunities where we can increase our efficiencies and really work to make sure that we're conducting our exams in the most efficient way possible. So, we've come up with a few different ways that we're trying to approach that. And one is what we're doing to help increase collaboration across our exam team. We've assigned in certain situations an individual that is responsible for really coordinating and working across the larger exam team to make sure that certain communication is occurring with our member firms, and this individual is a senior member of the team.

It's either going to be one of our exam managers or exam directors. This role was developed out of feedback that we've received from the membership, as well as from our own staff. And our goal here is really addressing certain challenges that we know our firms have faced around maybe having some confusion when we put in a particular request as to who to reach out to at FINRA. They've also expressed some concerns at times where they may have received several requests at a given time and were unclear as to how to prioritize one request over the other.

So, we really view this as someone that can really help increase communication not only over requests, but over the exam findings that are coming out of a particular exam, the status of our reviews, and really the overall expectations as far as timelines are concerned. One of the other things we're doing to try to address efficiency is being thoughtful about how we can continue to leverage the vast intelligence that we have within our organization, particularly that coming from risk monitoring and using that as a way to minimize some of the things that we have to request of our member firms and start driving as part of the exam into those known risks.

And we believe that this will help increase the efficiency in which we're identifying risks, and then ultimately, hopefully reduce the duration of those particular exams and some of the things that are going into the scoping of these firms are things we've talked about on this call, like the thematic reviews, but we'll be incorporating things that we can leverage from, again, that internal data that we have and make sure that we're really focusing these exams on the key areas of risk. And then one last thing I will mention is some work that we've done thinking about the size and scope of a particular examination, and the fact that we might be able to spread out some of that work throughout the year or across multiple years.

So, there could be situations, for example, where we may be going in and just focusing on maybe the trading aspect of the firm's business and separating that from maybe the larger firm exam in order to minimize the impact of our questioning and request to the firm at any given time. And so, we're hopeful that we can come in and look at certain aspects of a firm's business to give the firm an opportunity to really focus on that particular area. But all of this is done with having to really manage and understand what risks are present, to make sure that we're still really addressing those material risks in a timely fashion.

21:56 - 22:04

Kaitlyn Kiernan: And as you try these different pieces to try to improve some of the efficiency of the exam program, how are you measuring the impact?

22:04 - 22:39

John Martino: We're using different internal data, you know, whether that's the amount of hours or days that we spent on a particular exam, looking at the types of requests that we're doing, as well as getting feedback from our membership. So, I talked about earlier how some of these initiatives were driven by that feedback and the importance of that feedback. So, as we implement different initiatives and try different approaches, we want to hear from the membership and really understand what their experience has been with those things and whether they're seeing some of the improvements or efficiency gains that we were hoping for.

22:40 - 22:52

Kaitlyn Kiernan: It seems like there's a potential to benefit everyone here make for a less burdensome exam for firms. But also, as Michael mentioned, you have limited resources. So, making the best use of the limited resources that FINRA has.

22:53 - 22:58

John Martino: That's right. We really want to make sure that we're deploying our resources in the most efficient and effective way.

22:58 - 23:09

Kaitlyn Kiernan: Now, at the end of an exam-I've never been part of an exam; some of our listeners maybe haven't either. Tom, can you tell us what happens when an exam closes?

23:10 - 23:44

Tom Mellett: Sure. I'd be happy to, Kaitlyn. I want to start a little bit before we even start closing the exam and share that we stress with our examination teams the need to be transparent with firms and share both status of reviews that they're performing, as well as to share concerns and potential findings as soon as we start to detect them. And the reason we do that is we don't want surprises at the end of the exam, and we want firms to have an opportunity to understand what our concerns are and look into their business.

And to the degree that there is additional information or facts that haven't been brought to our attention, we want to get those early in the process so that we don't have a lot of back and forth at the end. But once the examiners complete their work, a member of our management team reviews the exam and they look at the work product and any exceptions that are present, and they look for quality and accuracy, and to ensure that the findings are supported by evidence that's been brought back into our exam file.

Once that process is complete, we issue a preliminary findings report. And this is a written document that goes to the firm, and it gives the firm an opportunity to preview the findings before we officially put it in an exam report. And to the degree that the firm wants to provide a response to that preliminary findings report-either to provide additional information or if there's a disagreement with the finding to present an alternative view-we want to offer that opportunity before we formally document an exception.

If a firm responds, we consider the response, and then we issue a final exam report, which, if there are no exceptions, that's the conclusion of the exam. But if there are exceptions, the firm is required to respond to the exam report and outline how it's going to remediate the exception that is presented. Once we get that response back, the management team considers both the severity of the finding or lack thereof, and the corrective action that the firm has either already taken or has committed to in their response, and they determine the appropriate disposition for each of the exceptions in the exam report.

And that can range from us taking no further action, where it's a relatively minor thing that's been corrected all the way up to a referral to our Enforcement Department if it's a serious finding or a serious gap that is more appropriate for a disciplinary action. The majority of our exceptions, though, are resolved with a cautionary action where a firm is cautioned for the violation, and then they're just reminded to ensure that they operate in a compliant fashion moving forward.

26:02 - 26:05

Kaitlyn Kiernan: And real quick, what is an exception?

26:05 - 26:40

Tom Mellett: An exception is a rule violation that our examiners detect, and it could be of a supervisory nature or control nature or could be an underlying finding with activity that the firm has conducted. As we're evaluating whether or not to cite an exception, we look at the materiality of the circumstances and consider the overall effectiveness of the systems and processes that a firm has in place, so that if there are small or occasional errors those are not highlighted as exceptions to the degree they're not material, and we focus on the more pervasive issues and the more serious issues.

26:51 - 26:58

Kaitlyn Kiernan: And I understand that now things might look a little different post exam than they have in the past. What's changed?

26:59 - 27:36

Tom Mellett: Historically, we only followed up immediately on findings that presented material ongoing risk and then we historically have done that, probably through a subsequent cause examination of a firm. For the bulk of the exceptions and findings that were not highly material, we would wait until the next exam, and then we would conduct an evaluation of whether or not follow up was required. And that could mean that up to four years could elapse before we evaluated whether or not we were going to follow up.

and conduct additional examination work to look for corrective action. What we've changed is on the back end of examinations right after they close we're now implementing a consistent process for all firms where if corrective action for the exception was not demonstrated during the course of the exam, we will follow up with the firm shortly after the examination concludes to verify that the corrective action has taken place. This provides a number of benefits. First and foremost, it enhances FINRA's ability to execute against its mission because we're ensuring swift corrective action for the protection of investors and the marketplace overall.

But it also potentially benefits firms because they get feedback right away about whether or not the corrective action they've taken is sufficient, and it potentially reduces the scope of a future examination because we're not following up on violations that may have been presented one, two or four years ago. So, it's an overall benefit to FINRA, investors and the markets and firms as well.

28:47 - 29:01

Kaitlyn Kiernan: And on the theme of consistency, I know in recent years, FINRA has also established a number of exception guidance groups. Michael, can you explain what these are and the role that they play in the post-exam process?

29:02 - 29:33

Michael Solomon: These are designed to gather together across FINRA people who have a high level of expertise in a particular area that has a lot of complexity and nuance, so that when there is a potential exception that an exam team has found, and our examiners are not all experts in all areas, they bring this to one of these exception guidance groups to review the evidence, what we've asked, and the group helps make a determination that, yes, that is something that should be cited as an exception.

Yes, this is something that potentially warrants consideration for enforcement referral, or you don't yet have all the information you need, you really should go back and clarify a few things with the firm or ask for these things or no, this really doesn't seem to amount to a violation of a rule. So, it's typically in areas that are fairly complex that we want to have a high level of consistency and accuracy in how we're citing firms, things like Regulation Best Interest, variable annuities, fixed income, AML, cybersecurity-those kind of areas that have a lot of complexity, a lot of moving parts where we want a high level of consistency so we're treating similarly situated firms in the same manner.

30:16 - 30:25

Kaitlyn Kiernan: And then another piece that might look different at the end of an exam is that chief compliance officer might receive a phone call. Why is that? What are you looking to learn?

30:26 - 31:09

Tom Mellett: Well, this actually starts from feedback we received over many years, which was that firms were hesitant to provide feedback about the exam process while an exam was ongoing. There was a fear of retaliation and just generally an unease. We still wanted the feedback, so we decided we needed to wait until the exam closes so that all the issues are fully resolved. And then we also wanted to emphasize the importance of feedback to us. So, for about 10 to 15 percent of our exams each year, either a senior director or a vice president will make outgoing contact to the chief compliance officer or another senior leader who is directly involved in the exam.

We probably won't call. We'll probably email and offer sometimes to have a conversation just to be a little more efficient, but the purpose is to get that candid feedback without any perception or fear that it could impact the results of an examination. So, during those calls, we ask things like the firm's perspective on the preparedness of the examiners. Did they understand the business model of the firm? Did they understand the industry issues surrounding what they were focusing on the exam? What were the firm's thoughts on the scope? Did we focus on areas that they thought were risky, or do they think we potentially could have focused on different areas, or spent our time in a more valuable way? We ask about the impacts of the exam on a firm's business.

Did it materially impact their operations, and if it did, how? So we can think about different approaches we could take for future exams. And then recently we've been asking about the value of onsite. We go onsite to perform some examination work. So, we want firms' perspectives on whether or not that onsite adds value, if it makes the examination proceed more efficiently, or if they have any other thoughts there. Importantly, these topics are going to evolve as different issues come up in the industry and we hear different lines of feedback, we're going to change the types of conversation that we're initiating, and we always welcome firms to discuss any topic they want with us about an exam, whether or not we specifically initiate that dialogue.

These calls have been and will continue to be extremely valuable in assisting with us getting feedback on things like those program efficiencies that I was discussing earlier. As we continue to roll out different initiatives and work to make the program better, it's helpful to use opportunities like this to get feedback from our membership and understand how those things are working out, and other improvements we might want to consider.

33:13 - 33:22

Kaitlyn Kiernan: To wrap up, there have been a lot of changes to the exam program in recent years. Michael, what ties all of this work together. What's your driving goal?

33:23 - 33:55

Michael Solomon: So, we've got 3,300 firms, over 600,000 registered representatives, 150,000 branches. That's a lot of landscape for the exam program to cover. We have a lot of staff, but that's a lot of work. So, what we've talked about here today is really trying to think about efficiency and how to really use our resources in the smartest, best way possible to address risks where they are, to help firms try to improve their controls in order to protect their customers and protect the marketplace. And I think we continue to try to develop a partnership, while we are a regulator, with the industry to try to do that efficiently and focus on the best areas for that common goal that I think we and the industry have.

And secondarily, I think we really have been trying to improve the amount and the quality of the communication, the interaction with the exam program and the firms, because I think that helps us get better and helps exams become as streamlined and as efficient as they can be.

34:29 - 34:53

Kaitlyn Kiernan: Great. Well, that's it for today's episode. Michael, John and Tom, thank you so much for joining me. Listeners, if you don't already, be sure to subscribe to FINRA Unscripted wherever you listen to podcasts. We are now even on YouTube. If you want to reach out, you can email us at FINRA unscripted at finra.org. Today's episode was produced by me, Kaitlyn Kiernan, and edited and engineered by John Williams. Until next time.

34:53 - 35:58

Outro Music

34:58 - 35:26

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