FINRA published its 2012 annual regulatory and examination priorities.  In doing so, the regulator highlights new and significant developments to its regulatory programs.  This includes what new methodologies FINRA employs to identify critical areas of heightened importance to staff members in Member Regulation, Market Regulation and Enforcement, and the new Office of Fraud Detection and Market Intelligence (OFDMI). Because the business and regulatory landscapes are constantly evolving, FINRA must continually track new risks and concerns that need to be integrated into the scope of its regulatory programs. C-I's Three-Part Report. In today's first installment, C-I looks at how FINRA has improved and enhanced its regulatory program.  In next week's installments, C-I will identify FINRA's regulatory and exam priorities - and there are a lot of them - and flush out what the FINRA staff is looking for when it investigates or reviews member firm activities. Part One. Regulatory Program Developments. On a 24/7 basis, FINRA seeks to identify, among other things, patterns, trends, and other data indicative of fraud or problematic business conduct.  Topical issues then are integrated into FINRA's risk-based approach which, in turn, enhance surveillance, examination and disciplinary initiatives. Toward that end, FINRA has enhanced its regulatory programs in terms of its ability to focus attention and resources where risk is deemed greatest, and exam programs are reshaped, accordingly.  Over the past year, among the FINRA has incorporated numerous topical and critical changes to its regulatory program, including the following:

• a broader data collection effort and more comprehensive risk assessment process.
• the capture and leverage of more granular operational and risk data, helping staff members to better understand firm business models and potential risks embedded within such models.
• new focus on 3rd-party transactional data and other contextual risk data at a granular level.
• a plan to deploy a Risk Control Assessment ("RCA") across the membership in Q1 of 2012.

Risk Control Assessment (RCA). The RCA will help FINRA better understand firms' business activities, product mix, customer base and underlying controls.  The RCA content is risk-based and does not seek to test compliance with specific rules and regulations.  As such, the RCA will be presented in a survey format, that includes the following attributes:

• survey content will be dynamically generated.
• surveys will include only those questions relevant to a firm's business model.
• firms will not be asked questions that FINRA already knows the answers to.
• surveys will be pre-populated with information currently in FINRA databases about firms, where ever possible or available.
• survey process will be subject to continual review and revision.
• attention will be given to minimizing the burden on individual firms.

ARE YOU READY TO PARTICIPATE IN THE RCA? FINRA's success will largely be dependent on the level of participation by member firms.  FINRA will share its findings around practices as appropriate in late 2012. For further details:  [FINRA Regulatory and Examination Priorities for 2012, 1/31/12].