Report on Use of 2024 Fine Monies

FINRA is a not-for-profit, self-regulatory organization (SRO) dedicated to promoting investor protection and market integrity in a manner that facilitates vibrant capital markets. FINRA’s regulatory functions serve to build public confidence in the financial markets. Accordingly, FINRA is committed to continuously improving its regulatory policies and programs to make them more effective and efficient. As part of its mission, FINRA enforces applicable federal securities laws and regulations and FINRA’s rules, and disciplines member firms and their associated persons, including by imposing sanctions when necessary and appropriate.

FINRA prioritizes obtaining restitution for harmed customers from member firms and their associated persons, when possible. Like many SROs in the securities industry, FINRA also can impose fines on member firms or associated persons to address wrongdoing and deter future misconduct. FINRA bases fine amounts on the facts and circumstances of each case and the principles in FINRA’s Sanction Guidelines. FINRA does not target any minimum dollar amount of fines to be issued. FINRA’s operating budget assumes that zero fines are imposed, and compensation determinations are not based on fines.

FINRA’s use of fine monies is governed by FINRA’s Financial Guiding Principles (Principles), which are published to provide transparency about how FINRA manages financial resources in fulfilling its regulatory responsibilities and mission. FINRA’s Board of Governors (Board) reviews and reaffirms the Principles biennially. As the Principles describe, FINRA accounts for fine monies separately, and any use of such monies is approved separately from other expenditures by the Board or its Finance, Operations and Technology Committee (Finance Committee). The Board or Finance Committee may authorize the use of fine monies only for one of four enumerated purposes:

• capital initiatives or nonrecurring strategic expenditures that promote more effective and efficient regulatory oversight by FINRA (including leveraging technology and data in a secure manner) or that enable improved compliance by member firms;
• activities to educate investors, promote compliance by member firms through education, compliance resources or similar projects, or ensure FINRA employees are highly trained in the markets, products and businesses it regulates;
• capital initiatives required by new legal, regulatory or audit requirements; or
• replenishing reserves in years where such reserves drop below levels reasonably appropriate to preserve FINRA’s long-term ability to fund its regulatory obligations.

In accordance with the Principles, FINRA also publishes a description of the use of fine monies approved by the Board or Finance Committee during the prior year. This report describes those approved initiatives that were supported by 2024 fine monies.

Summary

FINRA imposed $59.8 million in fines in 2024¹, and the Board determined that there were $89.3 million in fines-eligible expenditures in 2024 (i.e., capital initiatives, strategic expenditures and other activities eligible to be funded by fine monies based on the criteria set forth above). Because the total of fines-eligible expenditures exceeded the amount of fines issued in 2024, the balance of $29.5 million was funded from FINRA’s reserves and excess operating results.

The 2024 fines-eligible expenditures fall under two broad categories that align with the purposes set forth in the Principles:

Fines-Eligible Expenditures

The fines-eligible expenditures within these categories, which are described in more detail below, furthered FINRA’s goals to implement efficient oversight programs that protect investors and safeguard the markets, including expenditures that enhance examination, investigation and disciplinary programs; improve securities industry services and systems; strengthen the ability to track and surveil trading across markets; support member firm compliance; provide regulatory-focused training for FINRA staff; and equip investors with unbiased information, tools and resources to help them make informed investment decisions. Some of these projects are ongoing, multi-year initiatives that have extended into 2025 and, in some cases, will continue into future years.

Capital Initiatives and Nonrecurring Strategic Expenditures

Enhancing FINRA’s Examination, Investigation and Disciplinary Programs

In 2024, FINRA invested $39.6 million in several initiatives to enhance tools and systems we use for our examination, investigation and disciplinary programs. These initiatives better align resources with the risks and business practices of member firms; improve the efficiency and consistency of examinations and investigations; and better leverage data and analytics in these programs.

• Advanced Analytics Transformation—In 2024, FINRA invested $12.9 million in the continuing transformation of the advanced analytics program including the ongoing implementation of centralized data services and analytics platforms that serve as the foundation for numerous applications supporting FINRA’s regulatory programs.
• Examination Program Tools—FINRA invested $9.9 million to enhance the tools and systems FINRA examiners use to manage their work efficiently. FINRA is modernizing and streamlining the exam program to achieve a more consistent, risk-based approach to exams and enhance intelligence sharing. The investment also includes costs to improve the analysis of higher-risk firms and automate processing of exceptions identified during firm exams.
• Investigations, Disciplinary and Other Regulatory Operations Programs—FINRA invested $9.3 million to implement an analytics-driven and data-optimized standardized investigative workflow to improve transparency and efficiency, enhance case management, as well as automate data sets and enhance regulatory intelligence. Additionally, the spending also includes costs to modernize and enhance the systems and tools supporting electronic submissions for the Office of Hearing Officers.
• Other Member Supervision Programs—FINRA invested $7.5 million to enhance the membership application submission process; strengthen risk monitoring programs; enhance business intelligence analytics; develop tools to collect, store and analyze data resulting from amendments to FINRA Rules 3110 and 4210; and deliver other enhancements to various applications in the Member Supervision program.

Improving Securities Industry Services and Systems

FINRA administers a number of services and systems that serve member firms and their associated persons, and support oversight by FINRA, the Securities and Exchange Commission (SEC), state regulators and other SROs. FINRA invested $23.1 million to enhance these services and systems in 2024.

• Advertising, Corporate Finance and Other Systems—FINRA modernized the platforms firms use to comply with advertising and corporate finance reporting rules. Additionally, FINRA enhanced its fingerprinting platform driven by Federal Bureau of Investigation (FBI) requirements, enhanced FINRA Gateway to drive firm efficiencies, and established a central repository for 606 reports. FINRA invested $11.4 million to update or develop these systems.
• Transparency Systems—FINRA invested $8.1 million as part of a multi-year initiative to improve the Multi-Product Platform (MPP), which facilitates the collection and dissemination of transaction and quotation data across markets that FINRA supervises—namely over-the-counter trading of listed equities, unlisted equities, corporate bonds, Treasury securities and a variety of other fixed income instruments. This multi-year initiative will upgrade the MPP to better handle current market and regulatory compliance requirements. The investment also includes spending to implement advanced analytical tools, and develop, as required by an SEC rule, the Securities Lending and Transparency Engine to facilitate reporting securities lending transactions to FINRA and to publicly disseminate specified reported loan information.
• Registration and Testing System Enhancements—FINRA invested $3.6 million to enhance the FinPro tool for financial professionals and modernize registration and data processing.

Strengthening Regulators’ Ability to Track and Surveil Trading Across Markets

Combining data from FINRA reporting and transparency systems and the Consolidated Audit Trail (CAT), FINRA’s comprehensive surveillance program is an essential part of its work to monitor the integrity of the markets, both in service of its own mission and on behalf of exchanges. In 2024, FINRA conducted cross-market surveillance for all trading in U.S.-listed equities and options. FINRA also conducts surveillance of the unlisted equity market and fixed income instruments that trade in the over-the-counter market to identify potential market manipulation or other misconduct. In 2024, FINRA allocated $4.9 million to strengthen monitoring of equity, option and fixed income market activity. The investment includes costs to enhance the sophisticated “patterns” we use to detect a wide variety of compliance issues and suspicious conduct across markets, enhance reviews of the results of those patterns and respond rapidly to market events. In addition, we started to integrate our insider trading platform into the broader surveillance platform.

Compliance Resources, Training and Educating Investors

Supporting Member Firm Compliance

In 2024, FINRA spent $10.9 million to fund operations and various tools and resources to support member firm compliance.

FINRA offered virtual and in-person conferences and educational programs*, some of which were tailored to the unique business needs of FINRA member firms, including a Small Firm Conference, Advertising Regulation Conference, various offerings on Cybersecurity, including a conference and tabletop exercise workshop, and a Generative AI Primer workshop. Expenditures for 2024 also included costs associated with the FINRA Institute at Georgetown Certified Regulatory and Compliance Professional (CRCP)^® program, which provides compliance, legal and regulatory professionals with an in-depth understanding of the foundation, theory and practical application of securities laws and regulations. In addition, FINRA offered virtual education on various regulatory topics and business line specific webinars to member firms free of cost, including FBI Cyber Threat briefings, education on identifying fraud, and specific sessions for propriety trading firms and fixed income trading.

This amount also includes spending to improve firm compliance filing systems and to operate the FINRA Support Center. As part of a multi-year project, FINRA introduced the Support Center workforce management dashboard to better align staffing resources to enhance the experience for firms, financial professionals, regulators and the investing public as well as implemented a virtual assistant. FINRA also enhanced the machine-readable rulebook improving the ability of FINRA members to efficiently and effectively comply with FINRA rules.

*Note: The program costs include expenses net of funding received from registration fees or other revenues related to conferences and educational programs.

Regulatory-Focused Training for FINRA Staff

FINRA continues to provide training to staff, including examiners, to ensure staff is prepared for new regulatory challenges and has the proper understanding of the current regulatory environment. In 2024, FINRA spent $6.1 million on regulatory-focused training for staff in FINRA’s Member Supervision, Market Regulation and Enforcement departments.

Educating Investors

FINRA provides investors with unbiased information, tools and resources that can equip them to make informed decisions. In 2024, FINRA invested $4.7 million in various investor education research and programs.

• FINRA Investor Education Foundation—Throughout the year, FINRA provided management oversight and program and administrative support (including investing, legal, tax and treasury) to the FINRA Investor Education Foundation to carry out its financial capability-building initiatives.** The FINRA Investor Education Foundation released eight new research reports, including studies examining how consumers think about investment risk, the investing attitudes and behaviors of Gen X investors, and consumers’ perceptions about financial information generated from artificial intelligence versus a financial professional. In addition, the FINRA Investor Education Foundation hosted a financial fraud research conference, Disrupting the Cycle of Financial Fraud: Innovations in Consumer Protection, which brought together regulators, academics researchers, law enforcement agencies, advocacy groups and industry professionals to share research and ideas for addressing transnational criminal schemes and romance scams. The Foundation also created and launched a series of digital games and delivered financial literacy programming kits to 300 libraries in every state as part of its Thinking Money 2.0 initiative.
• Investor Education Programs—In 2024, FINRA continued to enhance BrokerCheck^®, and published new or substantially refreshed educational articles for retail investors on FINRA.org, including content on investment products (stocks, bonds, funds, options and crypto assets), risk tolerance, what it means to be regulated by FINRA and tips for avoiding emerging frauds by unregistered firms and individuals.

**Note: The direct program costs of the FINRA Investor Education Foundation are funded from the assets of the FINRA Investor Education Foundation, rather than from fine monies or reserves.