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FINRA Board Greenlights Five Rule Proposals Under Modernization Initiative

By Mari Nicholson

The Financial Industry Regulatory Authority’s board of governors approved five significant rule proposals at its first meeting of the year, targeting regulatory modernization and reduced administrative burdens on member firms.

“These rule proposals reflect our commitment to regulatory efficiency and responsiveness to the needs of today’s securities industry and markets without compromising investor protection,” said Scott Curtis, chair of FINRA’s board.

The approvals are part of the FINRA Forward initiative, a series of strategic efforts aimed at improving the agency’s effectiveness in protecting investors while adapting to a digital-first securities landscape.

Key Rule Proposals Approved

The five proposals address a range of operational and procedural areas.

  • Shortened exam waiting periods: The board approved reducing the time candidates must wait to retake FINRA qualification exams.
  • Electronic regulatory requests: Requests for information and testimony will now be delivered electronically via FINRA Gateway, aligning with modern communication practices and leveraging systems member firms already use for daily compliance.
  • Streamlined allocation approvals: The board voted to eliminate the requirement for firm principals to manually approve late allocations of bulk investment adviser orders, noting that the manual process has “limited utility” in today’s highly automated trading environment.
  • Alternative investment reconciliation: Requirements for certain alternative investments will be adjusted to conform with recent SEC no-action relief and updated FINRA guidance.
  • Arbitration enhancements: The proposals give parties more input when replacing arbitrators and codify compensation for replacement arbitrators who must review previous transcripts and recordings.

Curtis said the changes are intended to reduce unnecessary burdens on member firms while maintaining fair processes for investors and market participants.

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