Single Points of Accountability: Navigating Firms’ Experiences with FINRA

As part of FINRA’s Member Supervision Transformation, each firm was assigned a Single Point of Accountability – a senior leader in Member Supervision that helps firms navigate their experience with FINRA.  

Now that we are nearly two years into the new structure, we are joined on this episode by two SPOAs – Andrew McElduff and Brian Kowalski – to give us insight into their roles, how they interface with member firms, and how their positions have evolved since the new structure took effect in 2020.

Listen and subscribe to our podcast on Apple 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 

00:01 – 00:28

Kayte Toczylowski: As part of FINRA's Member Supervision transformation, each firm was assigned a Single Point of Accountability, a senior leader in Member Supervision that helps you navigate your experience with FINRA. We're now nearly two years into the new structure, and with us here today are two SPoAs to give us a bit of insight into their positions, their day-to-day activities, and how their roles have evolved since the new structure took effect in 2020.

00:28 – 00:38

Intro Music

00:38 - 01:02

Kayte Toczylowski: Welcome to FINRA Unscripted, I'm your guest host, Katie Toczylowski from FINRA's Member Relations and Education department. Kaitlyn is taking some time off, but she'll be back with you in the fall. Today, I'm joined by Brian Kowalski and Andrew McElduff, who are Single Points of Accountability within FINRA's Member Supervision department. Brian and Andrew, welcome to FINRA Unscripted! 

01:02 - 01:03

Brian Kowalski: Thanks, Kayte. Happy to be here.

01:03 - 01:11

Kayte Toczylowski: Brian, let's start at the beginning. Why was the Single Point of Accountability role created as part of the transformation?

01:11 - 02:28

Brian Kowalski: Sure. So, I think the SPoA role was primarily created to address two key challenges identified very early in the transformation effort. The first was how to address industry feedback. The firms are often engaged with several FINRA departments or even multiple people within a single department, and it's not always easy to coordinate across those teams or identify the right person to approach with a question. It was clearly a point of frustration.

And I think secondly, transformation would significantly alter our structure. So, the question was how do we reorganize ourselves to achieve its goals? So, when you consider that transformation was about reshaping risk monitoring and examinations to deliver our mission in the most efficient, effective and consistent way, it was contemplated that a great deal of internal coordination and collaboration to avoid duplication, we required directing and aligning resources to the risk profile and complexity of our member firms and furthering our risk-based approach to regulation. I think in the end, placing one person for each firm group, and therefore each firm, in the middle of all that just seemed to be the most effective and efficient way to hold ourselves accountable to internal and external stakeholders.

02:28 - 02:34

Kayte Toczylowski: So really, the title is what you get. That single point here at FINRA for firms to reach out to.

02:34 - 02:36

Brian Kowalski: Straightforward advertising. Yeah.

02:36 - 03:01

Kayte Toczylowski: Excellent. So, Brian, you just mentioned the transformation and how it restructured Member Supervision. So, for those of you that may not know, the exam and risk monitoring groups are now segmented into five firm groups: retail, capital markets, carrying and clearing, and diversified, and trading and execution. So, Andrew, are there five SPoAs then?

03:01 - 03:17

Andrew McElduff: No. So, with the size of the membership, the role was divided up. So, retail actually has four Single Points of Accountability. Capital markets says three single points of accountability, training and execution has one, and I'll let Brian touch on how many folks are in the clearing and carrying as well as diversified space.

03:18 - 03:33

Brian Kowalski: So, the diversified's split into two groups, there are three SPoAs there, and then I get the fortunate privilege of also being an SPoA for one of the subgroups within diversified, but then also have responsibility for the carrying and clearing firm group. 

03:34 - 03:39

Kayte Toczylowski: Great, so there are many SPoAs here at FINRA. How can a firm find out who is assigned to them?

03:41 - 04:01

Andrew McElduff: So, I think the first stop shop could be the Gateway. Within the Gateway, you'll see the assignments both of your SPoA, your risk monitoring director, as well as your risk monitoring analyst. We can each serve as your points of contact for varying levels of discussion, but first stop is definitely the Gateway. If you're not sure where to go from there, I would reach out to your risk monitoring analyst and they can point you in the right direction.

04:02 - 04:15

Kayte Toczylowski: And that's actually a great segue to this next question on risk monitoring directors. So, firms may be aware of their risk monitoring director, and what is the difference between an SPoA and that role?

04:16 - 05:03

Andrew McElduff: The risk monitoring director's primarily responsible for managing the day-to-day operations of the analysts, so the underlying firms that they're each assigned, making sure that the assessments, the risk monitoring work itself, is being done timely and it's being done accurately. The SPoA role is more so focusing on strategic goals and consistency across the larger group.

So, by way of example, I oversee the retail private placements and the retail pooled investments and variable annuities groups. Those groups encompass almost 500 firms, so I'm looking at, across those firms, peer to peer analysis, how we're handling the firms consistently, having discussions with firms, not treating all firms the same, we're looking at them independently as well as against their peer group. So, the RMDs are focused on the day to day. The SPoA is focused on the macro level of the group.

05:04 - 05:19

Kayte Toczylowski: Great distinctions, thanks for the explanation. So, as we discussed, this is still a pretty new role and I would love to know what both of your first thoughts were when you were chosen to be a Single Point of Accountability. Brian let's start with you.

05:20 - 05:53

Brian Kowalski: Definitely excited. First of all, it was an honor to be entrusted with executing on the transformation vision and in a role created specifically for that purpose. Anything like that is always a unique challenge and an exciting undertaking. But then once everything gets in front of you, the prospect of stepping into this newly created role, building a new team which for the first time would be location agnostic, overseeing the transfer of all our assigned firms, you know, the list just went on and on. But again, you don't get too many opportunities to do something like that, so to be put in that position was definitely challenging, but exciting.

05:54 - 06:41

Andrew McElduff: I think the only thing I would add the internal focus was obviously the external - how do we gain the trust of the firms that we were inheriting in this new role? Establishing that line of communication and by way of background, I was on the exam side for 12 or 13 years, and what we often heard was, I'm afraid to say something to FINRA because they're going to be retribution. You guys are going to do an exam. But one of the points of the Single Point of Accountability is you guys can call us, have that discussion with us. As I said to a firm yesterday actually, I want to hear the good, the bad, the ugly. Tell me where FINRA is doing well. Tell us where we can improve. I want to have that critical and constructive conversation.

So, we've had a really good outreach and conversations throughout the course of the last 18 or 20 months here. And I hope for that to continue. But I think that's a primary role that Brian and I have been focused on, as well, is gaining the trust of firms to pick up the phone and call us and be willing to share.

06:42 - 06:52

Kayte Toczylowski: In that time period of the 18 to 20 months that this role has been in existence, has anything changed in the role? Anything surprise you?

06:53 - 07:31

Andrew McElduff: Surprise, I would say, is how smooth things have gone. I think firms have taken to being within a firm grouping, being within a sub grouping, having a consistent risk monitoring analyst or risk monitoring director who are handling firms of like business models. That has surprised me, how smoothly that has gone and how positive the response has been in that space. For the SPoA role, I think the changes are really kind of just as we continue to evolve. Brian may have his style, I have my style. That's how we build out our programs. But all with the goal of FINRA first. And a lot of what came back from Robert's listening tour as far as FINRA360 is trying to improve and have better relationships with firms.

07:32 - 08:13

Brian Kowalski: And I think just to elaborate on some of those points, what surprised me was the speed at which we saw results. Because there were in light of all that change, within the first few months, we were already identifying certain issues and leveraging that information across similar firms and reaping the benefits of aligning firms with the staff experience and expertise. And I think to Andrew's point, throughout, the listening hasn't stopped. So, we continuously go out to the membership and solicit feedback, as Andrew said, the good, the bad and the ugly. And I think what we've seen is that the changes were well received and we're getting positive feedback from firms, especially around how well risk monitoring and exam understand their business and the risks and the way we're tailoring our program to that.

08:14 - 08:38

Kayte Toczylowski: Well, definitely off to a great start for this new role. Thank you for explaining the background of the Single Point of Accountability. Now that we have that knowledge, let's dive into how this position works from a practical standpoint for our listeners. On a day-to-day level, how does an SPoA engage with the exam and risk monitoring groups?

08:38 - 09:13

Brian Kowalski: Focusing on risk monitoring and examinations, SPoAs, along with exam group leaders are responsible for approving which firms required annual exam plan and ensuring the risk monitoring and exam staff come to an agreement on the appropriate scope and disposition of each examination. We'll regularly attend key strategy meetings, especially for higher risk firms. We very much take a risk-based approach in our roles and get involved with matters requiring escalation during the course of an exam. Definitely that collaborative effort. The whole point of this there is regular and ongoing discussion with our peers in examinations.

09:14 - 09:30

Kayte Toczylowski: So, one of the goals of the new structure was to assess firms that have similar business models, but to also share common findings across business models. Do the SPoAs do this or does it happen at a higher or a lower level?

09:31 - 10:40

Andrew McElduff: So, I think one of the goals of the SPoA role was to establish that point that would be able to see across the business models - the violations, the common findings, as well as the best practices. And I would say we've started to do that, but I think there's also been a trickle down. That mentality has changed. So a risk monitoring analyst now is not just sitting there saying, Well, I'm responsible for my 15 to 20 firms, whatever it is. But what's happening at each of those firms, as well as what are my peers who have the same firm type, same business models, doing and seeing.

By way of example, I have a biweekly with each of my sub teams. I have a weekly with my directors. And that's a lot of what we're sharing. What's happening at Firm X. How does that compare to Firm Y? same business models as well as similar products? What's happening in the market? We've also done a lot of outreach internally to folks from our Office of Financial Innovation and/or subject matter experts to come in and work with the risk monitoring team to understand the products, what's happening at a macro level across the markets. How could that impact or should it be impacting our firms? And then what questions should we be asking the firms to better assess the risk and how it's being mitigated at the firm at that point in time.

10:40 - 11:01

Kayte Toczylowski: We touched on this a little bit in the understanding the role, but I would really love to hit home for our listeners the types and kinds of issues that firms should be coming to their SPoA with. So, I was hoping that you could each share an example of an issue that should rise to the level of giving the SPoA a call.

11:02 - 12:18

Andrew McElduff: So, I'll start with nothing is too small. We're happy to field any and every question that you guys may have. And if it's not an answer that is readily available for us, we will get you the right person within FINRA. Allow us to kind of do the work for you a little bit versus you trying to figure out who the heck do I call at FINRA? So, I'll start with that.

But the second part of it is: programmatic changes, structural changes, business changes. Where do you see the direction of your firm going? I think those are the conversations that the SPoA would love to hear and know about what's happening at your firm. Where do you see your firm in the next 18 months, next five years? Is there an expansion plan or are you planning to come in for a change of membership and add on business lines? That's all stuff we would love to know before seeing a filing and saying, Oh, wait, this firm is expanding. Those are the conversations we love for you guys to engage us in.

 As I mentioned earlier, a number of firms have already started to do that. It's been a really positive experience where we can offer feedback and say, have you considered x, have you considered what this means for your CMA, expanded supervision or whatever it may be? So, I think those are the keys for me. Where do you see your business going? Material changes or major personnel changes, new supervisors, changes in that structure, new systems. Obviously, in the world of cyberthreats, we'd love to know what firms are doing in that particular area. All of those kind of new and novel items we'd love to know about.

12:20 - 13:33

Brian Kowalski: I would definitely agree with Andrew on a strategic partnership, certainly where there are questions on FINRA policy or process, feedback to Andrew's earlier point, the good, the bad, the ugly, that's what we're there for, really. One of the factors that went into creating the role is escalation, risk monitoring or exam focus and execution, escalation of significant disagreement or areas of disagreement. Those kind of things are what we are there for. And I think that's where I've seen firms leverage us for that because I think that's easier for them where they maybe have three touch points across three different departments.

 And there are questions as to whether we're really coordinated, on the same page. Maybe we're duplicating. We do our best, but admittedly we're not always perfect in that. But we're that person that you can reach out to instead of pulling three names and reaching out to three different people to say, Hey, can we just have a quick call to talk? Because I have some concerns. And it's a 15-minute conversation. We get it resolved and we move on. I think in the past, we just heard that that was again a point of frustration. And I think, when used properly, I think we can cut through a lot of that. So, I think that's working well.

13:34 - 13:53

Kayte Toczylowski: Great examples that I think make this position come more alive for our member firms. Let's take a minute to clear any myths that might be out there still about the Single Point of Accountability role. Have either of you heard any misconceptions from firms about this role?

13:54 - 14:42

Andrew McElduff: I haven't heard misconceptions, but I would say maybe just not a full appreciation for exactly what Brian just touched on - the scope of where we can touch across FINRA. So, where you see duplication or where you have frustrations with an exam process or a risk monitoring process. Or, Brian and I both sit in Member Supervision, but whether it be Market Regulation or OGC or Advertising, let us know, that's what we're truly here for. So, I don't know that it's misconception as much as are they really the right person to go to. Can they get me an answer or get me some guidance? We are truly here to be that Single Point of Accountability. The buck stops with us. If you reach out to us, we will be back in touch with you. We will get you the guidance or get you in touch with the right people within FINRA. So, I think it's more of the growth of the position and understanding that we are truly here for the membership.

14:43 - 15:26

Brian Kowalski: I think too, it's why we're using this opportunity to market the role, define the role, share exactly what we do. Because I think similar to Andrew and I wouldn't call them misconceptions, but when you as a firm, go on to your list of contacts, we're at the top. So, I've received requests for systems access, been in meetings and gotten jokes, what you do to deserve a title like Single Point of Accountability, things along those lines. But once you just take the time like we're doing now to explain what that role means, how we can assist the firm, partner with the firm, everything we've discussed, then once they get that better understanding that we see a better collaborative relationship, open dialogue. So, this is a valuable tool in just helping understand what we're there for.

15:28 - 15:37

Kayte Toczylowski: Now, as we conclude, what's one final thing you'd like firms to take away from this podcast about the Single Point of Accountability role?

15:38 - 16:05

Brian Kowalski: I think I'll start because I want to continue on that point. Andrew said it before, we can be a very valuable partner. Our interests are aligned with firms in ensuring that FINRA understands the firm's business and its risks, and that our risk monitoring and examination programs are tailored accordingly. So, we also, at the end of the day, want to ensure that firms get things right in the interest of investor protection and market integrity. So, no issue is too small, come to us, partner with us. We're happy to work through things.

16:06 - 17:46

Andrew McElduff: The partnership is truly the key here. What we are informed, meaning not just a Single Point of Accountability, but risk monitoring, what we're informed, what we know about the firm and where we gain a level of understanding that the firm has appropriate or excellent controls in place, that mitigates the risk that we're seeing at the firm. We think the firm has it appropriately handled, which then downstream, impacts your exam program and/or outreach from cause teams.

And a lot of the feedback that we've received, or at least I've received is, why am I on the cycle plan for this year? I just had an exam two years ago. It's all about that partnership and that relationship. What we know about the firm, how you guys have mitigated risks, how you're running the day-to-day operations, impacts when the firm will come up for their next examination. So, as you educate us, we will educate the folks on our side.

One thing I have said to a number of members previously is my ultimate goal for my groups is that the next time you get an exam, they're not asking 101 level questions. They have been informed and educated by risk monitoring because we've had the in-depth conversations with you guys about your firm, the business, the personnel, the systems, the supervisory tools, et cetera. So, the next time they come in, they're jumping into reviews and you guys come back to us and say, you know what? FINRA's asking the right questions, versus I'm educating another exam team about my business. Allow us to do that. Maybe there'll be some finer points that the exam team we'll touch on, but I think that's the key I would want folks to take away from this is what you've put into this relationship, you will see the results come, maybe not tomorrow, but over time we will build that. We'll have that information in house on our side and that will impact the longer-term relationship with FINRA and exam teams thereafter.

17:46 - 18:22

Kayte Toczylowski: This is such great information to help our member firms understand the role of the Single Point of Accountability. And I think what we've learned is what a powerful partner you can have with your SPoA. So, make sure that you reach out to yours soon. Brian and Andrew, thanks for joining us today. That's it for this episode of FINRA Unscripted. If you don't already, listeners can subscribe to FINRA Unscripted wherever you listen to podcasts. If you have an idea for a future episode, you can email us at [email protected]. Until next time.

18:22 – 18:28

Outro Music

18:28 - 18:51

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