A Financial Operations Principal (FINOP) is significant working directly in brokerage firms charged with the responsibility of monitoring and maintaining compliance and financial responsibilities. Outsourcing the FINOP function is an effective strategy because firms can benefit from contracting third parties to perform functions that are costly to accomplish in-house, especially for a relatively obscure expertise like FINOP.
Furthermore, outsourcing means that experienced professionals are engaged and continuously update themselves about the relevant regulatory change notifications, thereby avoiding penalties for non-compliance.
Outsourced FINOP also allows brokerage firms to avoid non-compliance with legal and regulatory requirements, free up resources, and prioritize the right strategies for sustainable growth that would result in a stronger defense for the brokerage firms’ operation.
What is a FINOPs’ & why should a company use a FINOPs?
A FINOP is a licensed person who is in charge of supervising the financial operations of a brokerage firm to complacency with the regulation rules outlined by FINRA. The FINOP’s main responsibilities include the preparation of financial documents, filing of reports with appropriate authorities, and guaranteeing that the financial processes the firm engages in respect the rules of the industry.
Here are key reasons why a company should use a FINOP:
Regulatory Compliance
The financial services industry has very many rules and regulations mainly due to the high risks involved and the brokerage firms having to adhere to these rules and regulations set by FINRA and other bodies. It is also necessary for the firm to have a FINOP to ensure that it complies with these regulations associated with financial reporting, capital, and procedures.
Expertise and Knowledge
FINOPs are usually individuals with prior working experience usually in brokerage firms with adequate knowledge of the financial operation of the company. They get to know all the reforms concerning the companies in the markets and offer helpful advice to guarantee that the operations of the firm will be legal and productive.
Risk Management
FINOPs assist in managing and presenting such financial data to minimize financial risks such as errors in financial statements, insufficient capital, or management of clients’ funds. Their function is very essential for preserving the financial credibility of the firm together with the client’s wealth.
Cost Efficiency
When a brokerage firm chooses to hire full-time FINOP it can be seen as expensive, especially for the brokerage firms that have less capital. This task is perhaps best left for an outsourcing move where the firm hires specialists to undertake such work on contract because firms would otherwise have to hire a professional to work for them full-time at a much higher cost.
Operational Focus
The expertise and knowledge possessed by a FINOP empower other members of the firm to focus on the core business areas like trading, identifying clients as well and strategizing instead of expending their efforts on the numerous and sundry regulatory and financial reporting procedures.
Enhanced Credibility
A proficient FINOP also ensures that the firm passes on honest and correct information to the consumer, authority, and other third parties to show that they are willing and capable of following the laws.
Does a FINOP owe a Broker-Dealer a legal duty of care?
FINOP does not always have a legal or contractual obligation to the broker-dealer as a fiduciary would to his/her clients. However, the duties of the FINOP are mainly regulatory and operational in the firm’s Closer. It means they are personally responsible for financial reporting and disclosure, compliance with legislation on operations, and the management of the client’s money and the firm’s money as required by the law and professional ethics.
It is the FINOP’s responsibility to monitor the financial status and the regulation compliance of the firm, but this duty is more in the capacity of enforcing rules rather than in having the fiduciary responsibilities to act in the best interests of the broker-dealer. This is based on the regulatory setup and roles of the Financial Industry Regulatory Authority and other officials that deal with the financial services sector.
Conclusion
Therefore, outsourced FINOP is a strategic value proposition that brokerage firms can leverage especially in matters of regulation and financial efficiency. Since this position is most suited to be held by qualified personnel or a firm, companies can take advantage of consultant expertise and update themselves with dynamic rules without paying large amounts to an extra employee. Not only does it safeguard accurate and detailed accounting, but it also strengthens fixed-income investment decisions for both the firm and the clients.
Outsourcing frees up internal resources to concentrate on the business’s strategic functions, which makes the organization grow and innovate. In conclusion, the decision to outsourced FINOP is useful in ensuring that the brokerage firms have strict compliance with the set regulatory standards, minimal financial risks, and overall credibility hence increasing sustainability and stability in a highly regulated industry.
