Thematic oversight examinations are a series of oversight  examinations that evaluate FINRA’s review of a particular regulatory  area across a number of its member firms. SEC’s FINRA Oversight Activities Covered Key Areas Identified in the Dodd- Frank Act

Since fiscal year 2015, SEC examinations related to FINRA included  reviews of all areas identified in Section 964. Selected Guidance Used for FINRA Governance Inspections Generally Was Consistent with Relevant Auditing Standards

We found that OCIE policies and procedures used for examining FINRA  since fiscal year 2015 generally were consistent with the requirements of  generally accepted government auditing standards. More specifically, we selected requirements for planning, prefieldwork  scoping, and communicating findings from the current manual and  compared those with similar sections in the prior version of the manual. Inspections of FINRA Governance Were Consistent with SEC Internal Guidance

OCIE (and from 2016, FSIO) program inspections of FINRA governance  in fiscal years 2015–2017 were consistent with internal examination  guidance. For our review, we judgmentally selected the most relevant requirements  from the section of the examination manual related to planning  inspections and the most relevant requirements from the section of the manual related to communicating inspection findings to determine if OCIE  conducted the inspections in accordance with its guidance. Agency Comments

We provided a draft of this report to SEC for their review and comment. Appendix I: Objectives, Scope, and Methodology

This report (1) determines if the Securities and Exchange Commission’s  (SEC) oversight of the Financial Industry Regulatory Authority, Inc.’s  (FINRA) operations and programs since fiscal year 2015 included the 10  areas specified in Section 964 of the Dodd–Frank Wall Street Reform and  Consumer Protection Act (Dodd-Frank Act), (2) evaluates the extent to  which selected SEC internal guidance on conducting examinations of  FINRA follows generally accepted government auditing standards, and  (3) evaluates the extent to which examinations of FINRA’s governance  practices followed SEC’s internal guidance. We evaluated whether  the documentation indicated that an examination’s scope and findings  covered one or more Section 964 areas or included other areas related to  FINRA oversight that were not specified in Section 964.
Why GAO Did This Study

The securities industry is generally regulated by a combination of federal and industry oversight. FINRA, a self-regulatory organization, is responsible for regulating securities firms doing business with the public in the United States. SEC oversees FINRA's operations and programs.
Section 964 of the Dodd-Frank Act includes a provision for GAO, following an initial report, to triennially review and report on aspects of SEC's oversight of FINRA. GAO issued its first report in May 2012 ( GAO-12-625 ) and its second report in April 2015 ( GAO-15-376 ).
This report (1) determines if SEC's oversight of FINRA included the 10 areas specified in Section 964 of the Dodd-Frank Act and (2) evaluates the extent to which selected SEC internal guidance for examinations of FINRA follows generally accepted government auditing standards and the extent to which SEC's examinations of FINRA's governance practices followed SEC internal guidance. GAO reviewed all SEC examinations relating to a Section 964 area completed since fiscal year 2015 (including five that were governance-related), reviewed certain SEC procedures used to examine self-regulatory organizations against Government Auditing Standards , and compared completed inspections against SEC guidance. GAO also interviewed SEC and FINRA staff.

What GAO Found

Since fiscal year 2015, Securities and Exchange Commission (SEC) examinations of the Financial Industry Regulatory Authority, Inc. (FINRA) covered each of the 10 areas specified in Section 964 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), such as governance, funding, and transparency. The most commonly covered area was FINRA examinations of its members.
Selected SEC guidance used to examine FINRA, including requirements for planning, prefieldwork scoping, and communicating findings, was consistent with generally accepted government auditing standards, and SEC inspections of FINRA were consistent with SEC's guidance. The five governance-related inspections of FINRA that GAO reviewed were consistent with SEC guidance for planning examinations and communicating findings (see fig.). Not all the requirements were applicable (because in certain instances completion of one requirement eliminated the need to satisfy others).

What GAO Recommends

GAO is not making any recommendations. SEC agreed with GAO's findings.