Are You Ready for a FINRA Audit Examination? Here's What You Must Know

EDISON, N.J. - July 15, 2025 - PRLog -- When it comes to staying compliant in today's complex regulatory landscape, one of the most critical checkpoints for broker-dealers is the FINRA Audit Examination. The Financial Industry Regulatory Authority (FINRA) conducts periodic audits to ensure that member firms are operating ethically, transparently, and in alignment with all industry regulations.

But with evolving standards and reporting requirements like the FINRA CAT (Consolidated Audit Trail), preparation now goes beyond basic recordkeeping. In this article, we'll break down what a FINRA audit involves, why CAT compliance matters, and how your firm can prepare effectively.

What Is a FINRA Audit Examination?
A FINRA audit is a detailed review of your firm's operations, documentation, procedures, and compliance practices. It typically includes:

Trade and transaction records
Books and financial statements
Supervision and risk management processes
Client communications and disclosures
Reporting obligations including CAT submissions
Audits can be routine, cause-based, or cycle-based and often involve document requests, interviews, and a comprehensive inspection of electronic systems.
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Why FINRA CAT Matters During Audit Season
The Consolidated Audit Trail (CAT) is a powerful initiative introduced to enhance market surveillance and transparency. FINRA CAT requires broker-dealers to report all order and trade events throughout the lifecycle of a trade — from initiation to execution.

Failure to comply with CAT reporting requirements can trigger red flags during your FINRA audit. Here's why it's critical:
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Data Accuracy: CAT reporting errors or missing events can result in regulatory scrutiny.
Timeliness: Submissions must adhere to strict deadlines.
Error Correction: Firms are expected to actively monitor and correct CAT errors in real-time.
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Compliance Monitoring: CAT data is cross-checked during audit reviews to assess reporting integrity.