According to FINRA rules, broker-dealers require the services of a Series 27 Financial and Operations Principal (FinOp) to manage various financial responsibilities and to stay compliant. Some financial consulting companies outsource the responsibilities of a FinOp, so firms can have access to professional expertise. Here is more information about the role of a FinOp in your financial services firm:
New Firm Preparation
A FinOp is able to help with various areas of preparing a new firm for FINRA, including:
- Organizing the pre-FINRA membership phase
- Meeting FINRA requirements
- Creating a business plan that relates to the firm’s duties
- Formatting line items in the budget
- Creating a chart in accounting software
A Financial and Operations Principal also works in an advisory role; they provide accounting advice for preparing the Supervisory Procedures Manual where it relates to the FinOp. The full broker-dealer services may assist firms in drafting and finalizing the manual. A FinOp also helps form the capital structure for your firm. The FINRA application requires documents such as profit and loss statements, balance and trial balances, and net capital computations. The Financial and Operations Principal compiles books and records to prepare these documents.
Some FinOps manage bank relationships, so your firm can have a reliable financial system when you begin your startup. Other services include contract negotiation, risk assessment, and tax facilitation. Using these services on a regular basis allows your firm to setup and maintain proper procedures.
Monthly Net Capital Management
Securities and Exchange Commission Rule 15c3-1 and FINRA requirements include having a firm meet minimum net capital thresholds. A Financial and Operations Principal handles daily monitoring of net capital compliance and follows the duties set by the 1934 Securities and Exchange Commission Act and the uniform net capital rules. They calculate the monthly net capital for your financial services firm and file the related FINRA reports through the right reporting systems. This monitoring helps keep your firm in compliance, and it may prevent regulatory consequences.
Report and Filing Preparation
A financial officer’s duties include preparing monthly statements and reviewing bank reconciliations, as well as checking accounts receivable. They are responsible for preparing accurate financial reports that are sent to the securities industry regulatory body. A Financial and Operations Principal also provides consulting for regulatory filings. FinOps works to prepare and submit quarterly, semiannual, and end-of-year reports by the filing deadlines. Meeting deadlines helps protect your firm’s FINRA standing. With a reputable consulting company, all deliverables are reviewed twice for accuracy. Forms they file and review include:
- Financial and Operational Combined Single Uniform Report
- Supplemental Statement of Income custody and Off-Balance Sheet
- Securities Investor Protection Corporation ReportÂ
Supervisory Role and Auditor Interaction
In the financial services firm, a financial officer takes a supervisory role. This includes supervising individuals who are involved in maintaining the client’s records. They also supervise the performance of responsibilities related to the financial responsibility rules connected with the Securities Exchange Act of 1934.
A financial officer is also responsible for supervising individuals who are involved in the back-room operations, specifically for tasks related to net capital. This can help prevent errors, allowing for easier corrections, and the presence of a financial officer offers a resource for individuals to ask questions. Senior management, supervisors, and people who have the authority to commit capital are required to pass an exam. People in a support position may only need to submit their fingerprints. A Financial and Operations Principal makes sure that all personnel working in these back-room operations are performed by registered individuals.
FinOps also interact with auditors on the firm’s behalf. This includes working with auditors during exams and interacting with regulators as needed; the responsibility involves being familiar with the firm’s activities and documentation. A Financial and Operations Principal also prepares financial statements for auditing.
Hire a FinOp
Outsourcing the Financial and Operations Principal role helps prevent the difficulties of scaling and allows you to receive the services of a full team. Having access to FinOp services allows all your accounting work to be supervised, providing greater accuracy. A Financial and Operations Principal is also responsible for securing the firm’s books and records. Some consulting companies also provide assistance for a firm’s in-house Financial and Operations Principal. To learn more about the FinOp role and other services, contact a financial consulting company today.
