New FINRA Initiatives to Support Members, Markets, and the Investors They Serve

By Robert Cook, President and CEO, FINRA

To serve its mission—promoting investor protection, market integrity, and vibrant capital markets—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, including by restructuring departments, building new technology capabilities, improving coordination across different functions, enhancing transparency, and identifying ways to be more risk-focused.

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.

In that spirit, we are launching FINRA Forward, a series of initiatives to further improve our effectiveness and efficiency in pursuing our mission. Among other things, FINRA Forward will focus on leveraging the expertise and input of our member firms through our unique model of self-regulation; capitalizing and building on recent enhancements to our regulatory programs and technology capabilities; supporting further innovation in financial services; and ensuring our regulatory policies and activities are tailored to the opportunities and risks of the current market, business, and technology environment.

We recently shared with our member firms three FINRA Forward initiatives, which are described below:

The goal of these initiatives is to enable our member firms to better serve investors and facilitate strong and fair capital markets in which everyone can participate with confidence. Every day, FINRA’s members and the markets they support play a vital role in increasing household wealth and retirement savings for millions of Americans, providing growth capital for businesses and entrepreneurs, developing innovative financial products and services that benefit investors, and building a more robust economy.

FINRA Forward is informed by dialogue with our member firms, and as we proceed with these and other initiatives, we will continue to benefit from their feedback, along with input from investors, trade associations, and other interested parties.¹ Ongoing engagement with our members is integral to our effectiveness as a membership organization, enabling FINRA to better identify and address risks, adapt our regulatory standards to the current environment, and support member firm innovation in technology, products and services that benefit markets and investors.

Modernizing Rules

FINRA is conducting a broad review of its rules to modernize requirements, facilitate innovation, and eliminate unnecessary burdens.

Clear, up-to-date, and tailored regulatory standards enable member firms to operate, compete, and innovate on a fair playing field. They help firms focus resources on better serving their clients and managing risks to their operations and customers. They provide the essential foundation for fair and safe markets that encourage capital formation and investor confidence. And they help ensure that misconduct does not undermine that confidence. But to serve these objectives, regulatory standards must be revisited from time to time and adjusted to reflect changes in financial markets, products, services, and risks.

We recently launched a new rule modernization initiative through Regulatory Notice 25-04, which solicits feedback regarding which areas of our rules warrant updating. Although FINRA regularly considers potential amendments to specific rules, and maintains a formal retrospective rule review program,² it is important to periodically step back and hear broadly from our member firms, investors, and others about which parts of our rulebook should be re-examined. It is also important for us to hear about non-FINRA requirements applicable to member firms that may interact with FINRA rules or programs, or otherwise impact member firms, in a manner that also merits our attention.

Regulatory Notice 25-04 highlighted two areas of initial focus for our review: (1) rules that affect member firms’ support of capital formation;³ and (2) rules that affect the extent to which member firms can organize and operate their workplaces using modern technology and related business practices.⁴ FINRA subsequently issued requests for comment in Regulatory Notice 25-06 on promoting capital formation and in Regulatory Notice 25-07 on supporting modern firm workplaces. Commenters can respond to Regulatory Notice 25-04 and help us identify other areas of our rulebook on which we should focus—for example, by modernizing, tailoring, enhancing, or eliminating requirements.

This rule modernization initiative will support our mission by establishing more efficient and effective standards that reflect the contemporary market, business, and technology environment, and that create opportunities for further innovation in financial services for the benefit of markets and investors.

Empowering Member Firm Compliance

FINRA is working to enhance how it supports member firm compliance to better protect investors and safeguard markets.

Member firms stand on the front lines of serving investors and preserving their confidence in the integrity of the markets. In conducting their respective businesses, each member firm is responsible for complying with the rules applicable to it, including, as appropriate, by maintaining reasonable supervisory and compliance functions tailored to its unique business model and risks. This can be a challenging task requiring significant resources. And given the economies of scale for compliance, these challenges can be especially acute for smaller firms. The median size of a FINRA member firm is 12 registered representatives (and the average is about 200).

As a membership organization, FINRA has a responsibility to support member firm compliance where we can appropriately do so. For the protection of investors and markets, it is much better for us to support effective compliance up front, rather than address problems after the fact. And to the extent we can help reduce unnecessary compliance burdens for member firms, we free up their time and resources to focus on other important challenges, such as identifying and mitigating emerging risks to investors, and innovating new ways to better serve them.

Of course, one vital step to support member firm compliance is to maintain practical, up-to-date, and well-balanced rules accompanied by clear guidance—which is the focus of our rule modernization initiative described above. In addition, over the years FINRA has developed other resources for member firms to assist their compliance functions—from conferences and events,⁵ to compliance guides and checklists,⁶ to more tailored support focused on firms with relatively fewer resources.⁷ Many member firms have indicated that these efforts provide real value, and they have asked us to build on them.

In the spirit of continuous improvement, we agree we can do more to empower member firm compliance, particularly since recent changes to our regulatory programs may create new opportunities. Thus, in tandem with modernizing our rules, we are also working on the following:

We will be soliciting more detailed input from our advisory committees and other groups on how we can better empower member firm compliance in the ways discussed above, or otherwise. Member firms are also invited to share suggestions directly with their risk monitoring analyst or risk monitoring director.⁹

Combating Cybersecurity and Fraud Risks

FINRA 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.

Cybersecurity and fraud are among the most significant risks facing investors, markets, and member firms, with the potential for significant business impacts and financial losses. The problem gets more challenging with each passing day, as we continue to witness a proliferation of new threat actors, more sophisticated technology-enabled methods, and an ever-expanding array of persons and activities being targeted. Fighting these threats requires new levels of information sharing and cooperation across the industry and regulatory agencies. We have heard from member firms that FINRA is well positioned to help support more comprehensive responses to these threats.

To date, FINRA has provided member firms with a range of resources for establishing a cybersecurity program, addressing cybersecurity vulnerabilities, combating cyber-enabled fraud, and identifying emerging scams.¹⁰ FINRA has also hosted cybersecurity-focused events to provide learning opportunities for member firms, including cybersecurity conferences and webinars with representatives of the FBI to discuss cyber and financial crimes.¹¹ And more generally, protecting investors—particularly senior investors—from fraud and other types of financial exploitation is a top priority for FINRA.¹²

While this work has been impactful, more is required to meet threats of this magnitude. And so, we are launching a third initiative to expand our cybersecurity and fraud prevention activities to further support member firms and their investors. Among other steps, we are establishing a Financial Intelligence Fusion Center as a dedicated program charged with collecting, analyzing, and disseminating cybersecurity and fraud threat intelligence to member firms in real-time through a secure portal. This Center will leverage internal and external intelligence sources to provide member firms with actionable insights on emerging risks and will focus on supporting small and mid-sized firms that lack dedicated intelligence capabilities.

We are also expanding our information sharing with firms to provide curated intelligence and strategic insights to enhance cybersecurity preparedness. These communications are intended to be timely and targeted to present threats, as well as tailored to the business models and vendor relationships of our member firms. We will also be seeking to expand our offerings of tabletop exercises and other tools designed to give member firms practical experience with addressing cybersecurity and fraud threats.

As with the other initiatives described above, FINRA welcomes feedback from member firms and other parties about additional ways that we can help combat fraud and cybersecurity risks. Member firms are also invited to share perspectives directly with their risk monitoring analyst or risk monitoring director.

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FINRA Forward advances FINRA’s commitment to continuous improvement, ensuring that our rules, programs, and activities are in line with the opportunities and risks in today’s capital markets. We look forward to engaging on these matters with our member firms, investors, and other interested parties.