FINRA Unveils Changes to Enforcement Program to Increase Transparency and Efficiency

The Financial Industry Regulatory Authority (FINRA) announced changes to its enforcement program on March 2, as part of its broader "FINRA Forward" initiative. [1] FINRA believes these “common-sense improvements,” which follow similar updates from the Securities and Exchange Commission (SEC)[2] and Commodity Futures Trading Commission (CFTC)[3] to their enforcement programs, will advance three core objectives: transparency, efficiency, and greater opportunities for member firms to be heard. By enabling faster and more efficient resolution of issues, FINRA believes these enhancements will strengthen investor protection and market integrity, while expediting the identification of compliance issues and risk mitigation.

Increased Transparency Throughout the Enforcement Process

One notable change involves how FINRA communicates with firms facing potential enforcement actions. FINRA will begin offering an introductory meeting for potential firm respondents at the outset of an investigation to meet with Enforcement staff, receive an overview of the process, understand FINRA's initial areas of focus, and raise questions or concerns. The announcement is silent on whether this opportunity will be afforded to potential individual respondents as well as firms. 

Additionally, Enforcement staff must now provide status updates to potential respondents at least every 90 days, ensuring that firms are not left uncertain about where their matter stands.  At the conclusion of an investigation, member firms may have an additional meeting in which FINRA shares its investigative findings and underlying evidence before formal charges are proposed. Firms then have the opportunity to present their view of the facts, mitigating factors, or additional context they believe Enforcement should consider. 

Efficiency Initiatives

To improve operational efficiency, FINRA has introduced a specialization program covering 11 areas of expertise, including systemic anti-money laundering and market-related issues, allowing cases that require specialized knowledge to be assigned to staff with deeper expertise, improving internal collaboration and driving consistency across similar cases. 

FINRA also launched a new pilot program related to firms' self-reporting obligations under FINRA Rule 4530(b). Under this pilot, Enforcement will review self-reported rule violations and, in appropriate matters, engage in dialogue with firms before launching a formal investigation, and firms may be permitted to conduct their own internal review and remediate problems without a concurrent FINRA investigation, potentially avoiding a full enforcement action altogether depending on the findings. 

Greater Opportunities for Firms to Be Heard

FINRA also implemented changes that give firms the opportunity to provide input before disciplinary decisions are finalized. Enforcement attorneys will reach out to firms before issuing a Cautionary Action Letter, allowing discussion of preliminary findings and giving firms and individuals the chance to provide context or challenge conclusions. Similarly, in non-urgent situations, FINRA will contact firms before issuing Rule 8210 information requests to clarify the scope and expectations. FINRA has also increased the standard time given for potential respondents to provide Wells responses to 30 calendar days. 

Additional Changes to Come 

FINRA has indicated that it plans to issue guidance in the coming months to clarify its approach to granting credit for cooperation and remediation, update its website with detailed information about enforcement checks and balances, and explore alternatives to on-the-record testimony in certain instances. FINRA also expects to publish an enforcement manual and to receive an independent assessment from former SEC Commissioner Troy Paredes and Professor Paul Eckert, with results anticipated in the second quarter of 2026. 

For more information on the revisions to FINRA’s Enforcement Program, please contact one of the authors of this article or your primary Katten attorney.