FINRA Enforcement Review Recommends Greater Process, Transparency, and Proportionality

On June 30, 2026, the Financial Industry Regulatory Authority (“FINRA”) released an external review of its enforcement program prepared by Professor Paul R. Eckert of William & Mary Law School and former Securities and Exchange Commission (“SEC”) Commissioner Troy A. Paredes (the “Review”). FINRA commissioned the Review to identify potential improvements to its enforcement function and related oversight. FINRA President and CEO Robert W. Cook stated that FINRA will consider the Review’s recommendations both individually and holistically, and that FINRA’s response will be guided by themes articulated in the Review, including the distinct role of FINRA as a self-regulatory organization, the importance of coordination across regulatory functions, and the need for clear principles governing enforcement.

The Review’s recommendations are broad and, if implemented, could materially affect how FINRA investigates, engages with member firms, requests information, conducts testimony, evaluates settlements, and measures enforcement success. Many of these recommendations also echo themes the SEC has recently articulated in describing changes to its own enforcement program and procedures.[1] The Review does not call for less enforcement. Rather, it recommends a more transparent, consistent, and outcome-oriented enforcement program that preserves FINRA’s ability to pursue serious misconduct while encouraging proportionate resolutions where appropriate.

Key Proposals

Among the Review’s most notable recommendations are proposals that would:

• Create a potential mechanism to challenge Rule 8210 requests. Firms could challenge certain Rule 8210 requests before a neutral decision-maker where scope or burden concerns arise, subject to safeguards against delay or abuse.
• Enhance engagement at the pre-Wells and Wells stages. Firms would receive clearer explanations of potential violations and enhanced procedural opportunities to respond to staff’s concerns before and during the Wells process.
• Increase transparency into FINRA’s enforcement process. FINRA would publish an Enforcement Manual, workflow diagrams, and improved access to disciplinary materials.
• Reframe how FINRA measures enforcement success. FINRA would shift from aggregate case counts and fines to evaluating whether each matter reaches the right regulatory outcome.
• Improve coordination and matter tracking. FINRA would centralize tracking of open matters and designate a function to coordinate requests and reduce duplicative interactions with firms.
• Promote more proportional resolutions. FINRA would expand alternatives to formal enforcement, provide more meaningful cooperation credit, and tie sanctions more closely to the Sanction Guidelines.

I. Management, Governance, and Oversight

Outcome-Oriented Enforcement Culture

The Review first recommends that FINRA adopt a more outcome-oriented enforcement culture. In particular, it cautions against using aggregate case counts, fines, or similar activity-based metrics as primary benchmarks for enforcement success. Instead, the Review states that FINRA should focus on whether the right regulatory outcome is reached in each matter. In some cases, that may mean bringing a formal disciplinary action; in others, it may mean remediation, guidance, an informal resolution, or a decision not to proceed.

Increased Senior Leadership Involvement

The Review advocates for greater involvement by FINRA senior leadership, including the CEO, in enforcement decisions before matters are adjudicated. This would include, within appropriate guardrails, input on whether formal action is warranted, settlement terms, allocation of resources, and whether a FINRA action would add meaningful value where another regulator is already pursuing related conduct. This would represent a significant shift in how firms interact with FINRA’s most senior leaders, as members (or their counsel) often do not meaningfully engage with senior leadership unless and until a matter is at the Wells stage.

II. Enhanced Coordination

Structured Cross-Departmental Collaboration

The Review next recommends more structured cross-departmental collaboration within FINRA. It suggests creating a senior-level “Deputies Committee” or broadening the role of the Regulatory Actions Committee so that expertise from across FINRA can be brought into enforcement matters earlier in the process. This recommendation is especially relevant for close calls, novel issues, policy-sensitive matters, or cases involving complex trading, technology, supervisory, operational, or market-practice questions. The Review’s premise is that the Enforcement department should not evaluate such issues in isolation when other FINRA departments have relevant subject-matter expertise.

Formalized Subject-Matter Expert Review

A more formalized role for subject-matter experts in reviewing proposed enforcement actions is also recommended, including review of letters of acceptance, waiver, and consent (“AWCs”), and complaints. This would create a more structured process for ensuring that FINRA’s charging decisions and resolutions reflect all relevant internal expertise, not only the perspective of FINRA’s Enforcement staff.

III. Due Process and Fairness

Meaningful Engagement During Pre-Wells and Wells Stages

The Review places significant emphasis on more meaningful engagement with firms at critical stages of the enforcement process.

At the pre-Wells phase, the Review recommends that firms receive a clearer explanation of the matter being referred to Enforcement, including the nature of FINRA’s concerns, potential violations under consideration, and assigned staff. Firms should also have a meaningful opportunity to respond and engage on the merits before Enforcement’s theories become fixed.

The Review also recommends enhancements to the Wells process itself, including published procedures, reasonable submission timelines, reverse proffers or similar “open jacket” practices, senior staff participation in Wells meetings, and clearer post-decision communications regarding charges, sanctions, remediation, and cooperation credit.

These recommendations would make the pre-Wells and Wells stages more important advocacy opportunities. Firms should be prepared to address legal and factual defenses as well as FINRA’s methodology, analytics, remediation efforts, customer impact, supervisory controls, and any ambiguity in applicable requirements.

Time Limitations on Enforcement Matters

The Review also recommends adopting formal limitations periods for enforcement matters. As a general matter, FINRA should follow applicable federal limitations periods for matters based on federal securities laws or FINRA rules incorporating those laws. For other matters, a five-year limitations period is suggested as a reasonable starting point, subject to appropriate exceptions such as tolling, continuing violations, or equitable considerations.

This recommendation would be important in matters involving older conduct, changed systems, faded witness memories, or personnel turnover. It also reflects a broader theme in the Review: enforcement matters should proceed with greater discipline and timeliness.

IV. Transparency in Processes and Procedures

Publishing Policies and Procedures

The Review recommends that FINRA publish a public Enforcement Manual consolidating its enforcement policies and procedures in one publicly available source, allowing firms and counsel to better understand how matters move through the process and what procedural protections apply.

Greater process visibility is also recommended, including workflow diagrams and other public materials explaining the lifecycle of a matter from exams through resolution.

The Review also recommends improving access to disciplinary materials by making complaints, decisions, settlements, and other publicly available materials easier to search, including potentially through third-party legal research platforms.

Firm-Specific Transparency and Matter Tracking

A centralized point of contact and a tracking function for member firms are also recommended to avoid situations where firms face multiple, uncoordinated requests from different FINRA departments without understanding how those requests relate to one another.

This centralized function would track open examinations, reviews, investigations, information requests, and referred enforcement matters. It would also coordinate requests, provide status updates, address firm inquiries, and escalate issues where appropriate.

End-to-end matter tracking is also recommended. FINRA should track matters from inception through final resolution and note key milestones, age, complexity, sources, and resolution status. Firms should also receive more meaningful status updates.

V. Information Requests and Testimony

Rule 8210 Process Reforms and Guardrails

The Review recommends more disciplined and transparent processes for FINRA’s use of information requests under FINRA Rule 8210, including centralized tracking, pre-issuance discussions with firms, realistic response deadlines, senior-level approval, and safeguards against duplicative or overbroad requests.

The Review also recommends creating a formal mechanism for firms to challenge inappropriate Rule 8210 requests before a neutral decision-maker. Such a process would need guardrails to prevent delay or abuse but would represent a significant new procedural protection if adopted.

On-the-Record Testimony (OTR)

OTR procedures should be more formalized, published, and consistent. Recommendations include limiting the number of staff attending OTRs, ensuring witnesses have appropriate access to exhibits and transcripts, and reserving OTRs for matters that warrant sworn testimony.

VI. Limiting Unnecessary and Duplicative Investigations

Limiting Unnecessary Enforcement Involvement

The Review recommends limiting Enforcement’s visible involvement before a matter is formally referred, noting that Enforcement staff participation in routine exams or pre-referral matters can cause firms to treat an exam as an adversarial investigation even before a referral has occurred.

Limiting Duplicative Investigations

Avoiding duplicative enforcement is also recommended. Where the SEC, the Department of Justice, the Commodity Futures Trading Commission, the Financial Crimes Enforcement Network, state regulators, or another authority is already pursuing related conduct, FINRA should consider whether its own action would add something meaningful. This does not mean FINRA should automatically defer, but it should evaluate whether a parallel action would advance a distinct FINRA objective or merely duplicate another regulator’s effort.

VII. Settlements, Resolution, and Advancing FINRA’s Mission

Resolution Alternatives and Cooperation

The Review recommends expanding alternatives to formal enforcement, including greater use of programs such as Rapid Remediation, surveillance report cards, and other approaches that resolve compliance shortcomings quickly where formal disciplinary action is not necessary.

More streamlined resolution paths for technical or good-faith compliance matters that do not involve harm to investors are also recommended, particularly where the issue has already been remediated.

The Review further recommends more meaningful cooperation credit. Cooperation should not have to be “extraordinary” to count, and firms should not be denied credit simply because they had a self-reporting obligation or undertook expected remediation. AWCs should explain what cooperation credit was given and why.

Sanctions, Charging, and Remediation

Proportionality and transparency in sanctions are also emphasized. Sanctions in settled matters should be tied to the Sanction Guidelines, departures should be documented, and AWCs should include sufficient context—including mitigating and aggravating factors—to explain why the sanctions are appropriate.

The Review additionally recommends reducing the use of “tag along” Rule 2010 charges where the underlying violation does not involve fraud, unethical conduct, or comparable commercial-honor concerns. Overuse of Rule 2010 in technical or non-fraud matters risks diluting the significance of that ethical obligation.

Earlier engagement on remediation is also recommended. FINRA staff should discuss potential remedial expectations with firms earlier in a referred matter, rather than waiting until settlement discussions, helping firms address issues promptly and better understand FINRA’s concerns.

Finally, the reviewers recommend strengthening independent review of settlements. In particular, FINRA should reevaluate the current delegation structure under which the Office of Disciplinary Affairs reviews proposed settlements on behalf of the National Adjudicatory Council (the “NAC”). The recommendation suggests that FINRA should consider whether the NAC should have a more direct role in settlement review, particularly for categories of matters that raise significant judgment, policy, or sanctions issues.

Conclusion

For member firms, the Review is significant because many of the recommendations would affect the practical conduct of FINRA matters from referral through resolution.

FINRA has indicated that implementation of any of the Review’s recommendations will take time, and the recommendations remain subject to further consideration. In the meantime, firms facing FINRA inquiries or enforcement matters should consider the Review as a useful advocacy framework when engaging with FINRA on process, burden, timing, remediation, cooperation credit, sanctions, and the appropriate regulatory outcome.

[1] For example, in its February 24, 2026 press release, SEC’s Division of Enforcement Announces Updates to Enforcement Manual, the SEC described updates to its Enforcement Manual designed to promote fairness, transparency, efficiency, consistency, and uniformity, including changes to the Wells process, senior leadership participation in Wells meetings, simultaneous consideration of settlement recommendations and related waiver requests, internal collaboration, and cooperation-credit guidance. In its April 7, 2026 release, SEC Announces Enforcement Results for Fiscal Year 2025, the SEC similarly stated that enforcement effectiveness should be tied to investor protection and market integrity rather than “prioritiz[ing] volume and record-setting penalties.” SEC leadership has reinforced those themes in public remarks, including Chairman Paul S. Atkins’s October 7, 2025 Keynote Address at the 25th Annual A.A. Sommer, Jr. Lecture on Corporate, Securities, and Financial Law and Division of Enforcement Director David Woodcock’s May 13, 2026 Remarks at the MFA Legal & Compliance 2026 Conference, both of which emphasized fair process, transparency, quality over quantity, real investor harm, and appropriately tailored relief.