An Enforcement Tuneup: Following SEC’s Lead, FINRA Looks Under Its Own Hood

The SEC recently updated its enforcement program in an effort to increase fairness, transparency, and the quality of its decisions made during investigations. And the Financial Industry Regulatory Authority (FINRA) is following suit by proposing changes to its enforcement program aimed at improving transparency, efficiency, and opportunities for respondents to be heard during its investigations.

SEC Enforcement Changes

In October 2025, SEC Chairman Paul Atkins announced reforms to be made to the agency’s Wells process and to certain settlement procedures. The Wells process allows individuals or firms under investigation to present factual evidence, legal arguments, and mitigating circumstances to the regulator in an attempt to persuade the SEC (or FINRA) not to proceed with the enforcement action.

On February 24, 2026, the SEC updated its Enforcement Manual to reflect the changes. Specifically, the updates include changes to the Wells and settlement processes, a formalization of “white paper” submissions, and the inclusion of off-channel communications within the scope of SEC requests for production of “documents.” Finally, the revisions encourage SEC staff to send termination letters to cooperating parties. For additional details, see “SEC Gives Enforcement Manual an Overdue Physical.”

FINRA Enforcement Changes

In March 2026, FINRA’s Head of Enforcement Bill St. Louis announced that FINRA will update its enforcement procedures in accordance with its “FINRA Forward” initiative. Specifically, he announced plans to advance three core objectives:

1. Transparency

FINRA plans to increase transparency through expanding communications with firms facing potential enforcement. First, FINRA will schedule introductory meetings at the beginning of investigations for Q&A sessions between the respondents and enforcement staff. Second, enforcement staff will give updates to respondents at least every 90 days during investigations. Third, at the end of investigations, member firms can request another meeting, prior to formal charges being filed, with FINRA officials to discuss any findings from their investigations. Member firms will be permitted to present their version of the facts, any mitigating factors, or additional context.

2. Efficiency

FINRA plans to increase efficiency through the creation of a specialization program that will cover 11 areas of expertise, including systemic anti-money laundering and market-related issues. The program is intended to ensure that the enforcement attorneys working on FINRA cases are the ones who have the deepest expertise relevant to the matters in question. In so doing, FINRA aims to increase internal collaboration and consistency throughout FINRA’s enforcement actions.

FINRA also introduced a self-reporting pilot program. Member firms in the self-reporting program will report their own potential violations and, when appropriate, engage directly with the enforcement staff before a formal investigation is started. In addition, member firms may be allowed to conduct their own internal review and remedy problems without concurrent FINRA investigations. Ultimately, the program is intended to avoid a full enforcement investigation in appropriate cases.

3. Greater Opportunity to Be Heard Before Disciplinary Decisions Are Finalized

FINRA plans to allow enforcement staff to contact member firms prior to issuing “cautionary action letters.” FINRA believes this dialogue will give firms and individuals the chance to provide context or challenge conclusions. Moreover, on occasion, FINRA will contact firms prior to issuing Rule 8210 information requests in order to clarify for the member firm the scope of FINRA’s expectations. Finally, FINRA plans to allow firms to respond to Wells notices on an increased 30-day timeline.

Future Performance

With these changes, FINRA appears well positioned to continue FINRA Forward in a manner that reduces any stumbles or misfires in its enforcement program. Focus on core principles such as transparency, efficiency, and opportunities for respondents to be heard will bode well for the success of FINRA Forward. And, while FINRA is clearly following the lead of the SEC here, these changes, collectively, should foster better resolutions for many FINRA members.