FINRA Provides Additional Guidance on Broker-Dealer Liquidity Risk Management

September 23, 2015
Client Alert

The Financial Industry Regulatory Authority, Inc. recently issued a Regulatory Notice providing guidance on liquidity risk management practices that FINRA expects member firms to consider and implement in preparation for adverse circumstances. The primary role of liquidity risk management is ensuring the availability of cash or highly liquid assets to support a broker-dealer’s funding needs under both normal and stressed conditions, including idiosyncratic or systemic events. The notice is directed to member firms that (1) hold inventory positions or (2) clear and carry customer transactions. The notice follows FINRA’s review of member firms as they underwent stress tests and describes FINRA’s observations and recommendations resulting from that review.

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