Skip to content
AltsWire
Click Here to Subscribe to Our Free Daily News Updates

FINRA Initiative Seeks to Update Rules, Improve Compliance, Limit Fraud

By Mari Nicholson

FINRA Initiative Seeks to Update Rules Improve Compliance Limit Fraud

The recent launch of a series of initiatives called FINRA Forward is aimed at improving the organization’s effectiveness and efficiency in pursuing its mission. Robert Cook, chief executive officer of the Financial Industry Regulatory Authority, spoke of that mission – promoting investor protection, market integrity, and vibrant capital markets – in a recent blog post about the new program.

“FINRA must continuously improve its regulatory policies and programs to make them more effective and efficient. During my time as CEO, we have worked hard to build a culture of continuous improvement across FINRA – and we have come a long way. … But continuous improvement means our work is never done, especially since capital markets are constantly evolving and new opportunities to do better are always emerging,” said Cook.

The three FINRA Forward initiatives are as follows.

Modernizing FINRA Rules:

  • FINRA is conducting a broad review of its rules to modernize requirements, facilitate innovation, and eliminate burden. It emphasized the need for clear, updated, and tailored regulatory standards for fair competition, client service, risk management, and market confidence. Through Regulatory Notice 25-04 – stating that rules must be periodically adjusted for market changes – FINRA is soliciting broad feedback from member firms, investors, and others on which parts of its rulebook should be re-examined, including how non-FINRA requirements might interact with its rules.
  • The notice highlighted two initial focus areas: rules affecting member firms’ support of capital formation, and rules impacting firms’ ability to operate workplaces using modern technology and practices. FINRA subsequently issued specific comment requests on these topics (Notices 25-06, 25-07), while encouraging continued feedback through Notice 25-04 to identify areas for potential modernization, tailoring, or elimination.

Empowering Member Firm Compliance:

  • FINRA said it is working to enhance how it supports member firm compliance to better protect investors and safeguard markets. The organization acknowledged the significant resources compliance requires, particularly for smaller firms. Thus, it said it seeks to build upon existing resources like compliance guides and events, specifically tailored for firms of varied sizes and business models.
  • The organization aims to strengthen the feedback loop – how insights from its regulatory programs are shared back with member firms. By providing feedback on potential compliance risks or issues observed during its oversight work, FINRA seeks to help firms understand how their programs compare to others and avoid compliance failures.
  • The self-regulatory body also hopes to update how it conducts its own oversight activities – e.g., examinations, investigations, and information requests – to reduce unnecessary burdens on firms without compromising regulatory effectiveness. Leveraging recent program and technology enhancements, FINRA will explore how to: better calibrate data requests; improve communication to avoid redundant or conflicting requests; and optimize the scope, timing, and frequency of reviews based on firm business models or risk profiles.

Combating Cybersecurity and Fraud Risks:

  • Acknowledging the increasing sophistication of threat actors and methods, FINRA said it is expanding its cybersecurity and fraud prevention activities to support member firms’ risk management capabilities and resilience against emerging threats, and to better protect member firms and their investors from harm.
  • FINRA is establishing a dedicated Financial Intelligence Fusion Center charged with collecting, analyzing, and distributing real-time cybersecurity and fraud threat intelligence to member firms via a secure portal. It aims to provide actionable insights on emerging risks by leveraging internal and external intelligence, with a particular focus on assisting small- and mid-sized firms that lack dedicated intelligence capabilities.
  • FINRA also plans to enhance its information sharing with firms, providing curated intelligence and strategic insights that are timely, targeted to current threats, and tailored to firms’ specific business models and vendor relationships. The organization also intends to expand its offerings of practical tools, such as tabletop exercises, designed to help firms prepare for and address cyber and fraud incidents.