We are implementing some changes to our examination protocols which will improve our efficiency and reduce the impact of onsite exams for our licensees. The changes are part of our ongoing efforts to implement and promote Results Washington programs and outcomes.
Historically, DFI-Consumer Services Examination Unit (DFI-CS) used a risk-based scheduling system which meant more frequent full-scope examinations for licensees classified as high risk and less frequent exams for those classified as low risk. As the number of licensees grows, we must adapt procedures to ensure we achieve fair regulation which promotes a stable and competitive financial services industry. At the beginning of 2013, DFI-CS implemented a Supervisory Watch Examination (SWE) for licensees with a three or higher Report of Examination (Report) rating, or in cases where a licensee failed to adequately respond to the recommendations in the Report. The SWE protocol includes follow-up examinations within six months of receipt of a licensee’s response to a Report. The SWE reduces the chances of a licensee going long periods of time repeating deficiencies cited in the previous Report. It has also proven to be more effective than waiting 12 to 24 or more months to conduct a full scope follow-up examination.
Now we are implementing a Limited Scope Examination (LSE) protocol to complement our full scope examinations. LSE’s are for lower risk licensees who received a rating of “2” or better on their prior Full Scope examination. The LSE will be an off-site examination and will ensure we examine all of our licensees at least once every sixty months.
Determining When to Conduct Limited Scope Examinations:
Robust regulation requires all licensees to have Full Scope examinations. Regardless of a licensee’s rating on a Limited Scope exam, their next examination will be a Full Scope. The chart linked below shows how our three examination protocols (Full Scope, Limited Scope, and Supervisory Watch) will effectively regulate licensees.
See: Licensee Examination Flow Chart (pdf)
Content of a Limited Scope Examination
Our Limited Scope exam covers fewer required elements than a Full Scope exam. The LSE Management Questionnaire is linked below .
See: Manager's Questionnaire (pdf)
For licensees who are able to deliver examination data electronically, the exam will be conducted off-site and will require about three days compared to the one to two weeks required by a full scope exam.
The LSE is an examination protocol that complements our existing Full Scope and Supervisory Watch programs. Licensees earn the benefit of an LSE by presenting a lower risk profile and by continued positive results on their examinations. Higher risk companies or companies that become higher risk over time will undergo Full Scope and Supervisory Watch exams to bring them into compliance.