FINRA Issues Guidance on Its Securities Compensation Playbook

FINRA has completed the first year of its comprehensive FINRA Forward initiative in an effort to modernize its playbook. In its April 2026 report titled “FINRA Forward: A Year of Progress,” FINRA discusses its broad review of its rules. It also identifies — as a significant regulatory policy initiative underway — the publishing of guidance regarding the payment of transaction-based compensation to personal services entities under the SEC staff’s important no-action letter issued in 2025 to the Financial Services Institute (FSI).

As we previously reported, the FSI letter resolved longstanding uncertainty relating to whether transaction-based compensation may be (1) paid by a registered broker-dealer to a “personal services entity” that is not so registered and (2) received by a broker-dealer’s associated persons from entities other than that broker-dealer. The FSI letter permits= hese compensation arrangements, subject to satisfaction of conditions.

To update its playbook accordingly, FINRA issued guidance in June 2026 on how its rules apply in relation to the FSI letter. FINRA made this guidance retroactive — effective November 17, 2025, the date of the FSI letter. The June 2026 guidance does not impose any new obligations, but rather elucidates the application of several existing FINRA rules and obligations in the context of the FSI letter.

With regard to payment of transaction-based compensation to an unregistered personal services entity, FINRA’s guidance clarifies that the FSI letter satisfies one condition of the exceptions to three FINRA rules:

• Rule 2040, which prohibits payments to unregistered persons; and
• Rules 2320 and 2341, which prohibit a firm’s associated persons from accepting compensation from anyone other than that firm in connection with the sale and distribution of variable contracts of an insurance company or investment company securities, respectively.

Specifically, FINRA’s guidance clarifies that firms wishing to pay transaction-based compensation to a personal services entity pursuant to the FSI letter, and associated persons who wish to receive transaction-based compensation from such a personal services entity, will satisfy Rules 2040, 2320, and 2341 by complying with the conditions of the FSI letter.

With regard to supervision, FINRA’s guidance instructs firms wishing to pay transaction-based compensation to a personal services entity pursuant to the FSI letter to review and update their existing supervisory systems and written procedures under FINRA Rule 3110 to be sure they adequately address the conditions set forth in the FSI letter, particularly those conditions relating to:

• Registration and control by the broker-dealer.
• The business activities of the personal services entity.
• Limitations on the activities of unregistered personnel.
• Related payment administration and agreements.
• Record-keeping and regulator access.

Finally, FINRA’s guidance addresses payment of transaction-based compensation to a personal services entity in the context of Rule 2210 (requirements for communications with the public). It also reiterates conditions of the FSI letter that require record-keeping of payments a firm makes to a personal services entity and regulator access to records in the possession of the personal services entity maintained on behalf of the firm.

Although firms may need to revise somewhat their compliance policies and procedures in order to rely on the FSI letter and FINRA’s June 2026 guidance, these developments doubtless mark a very welcome change in the state of play for many firms.

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