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Innovation Outreach Initiative

Background

FINRA has been actively monitoring financial technology-related (FinTech) developments in the securities industry. A growing number of FinTech firms have been embracing new technologies, pioneering innovative products and developing new client-oriented financial services business models. Many traditional financial service providers are also rethinking their business models, incorporating these technologies and services. As part of the FINRA360 process, FINRA determined that it needed to enhance resources dedicated to this rapidly developing area of the industry.

“We look at the landscape of the securities industry and try to figure out what issues with securities are likely to crop up and what they are likely to affect.”

— Haimera Workie, FINRA’s Senior Director for Emerging Regulatory Issues, Remarks from FINRA’s A Few Minutes With FINRA Video Series, February 7, 2017

FinTech has the potential to transform various broker-dealers' business lines, including investment banking, wealth management, trading and research. Broker-dealers are also exploring and leveraging new technologies such as cloud storage, artificial intelligence, machine learning, and blockchain to enhance their overall operational infrastructure and compliance functions. All of these FinTech-related changes are contributing to an evolving landscape for broker-dealers' operations.

To foster an ongoing dialogue with the securities industry and to better understand FinTech innovations and their impact on the industry, FINRA established an Innovation Outreach Initiative in June 2017. FINRA created a cross-departmental team that is responsible for carrying out the initiative and working closely with industry participants to gain real-time intelligence on FinTech issues. The team is tasked with creating and managing a FinTech Industry Committee to facilitate a continuous discussion on FinTech developments and how FINRA's rules and programs interact with technology innovations.

In 2019, FINRA also formed an Office of Financial Innovation to serve as a central point of coordination for issues related to significant financial innovations by FINRA member firms, particularly new uses of Fintech. The Office collaborates with teams across FINRA to promote engagement with the industry, regulators, investors, and other stakeholders on matters involving significant financial innovation by FINRA member firms. This collaboration will be accomplished through outreach to FINRA stakeholders, training of FINRA staff, research and publications, internal coordination across FINRA, and collaboration with other regulators. The team will also incorporate FINRA's existing Office of Emerging Regulatory Issues, which focuses on analyzing new and emerging risks and trends related to the securities market.

Summary Actions

  • Launched an Office of Financial Innovation.
  • Launched a new FinTech webpage that highlights emerging FinTech topics and related FINRA materials (www.finra.org/fintech).
  • Published reports on blockchain technology and digital investment advice.
  • Published Investor Alerts on initial coin offerings (ICOs) and crowdfunding.
  • Released white paper outlining recent regulatory technology (RegTech) developments within the securities industry and potential opportunities and implications these technologies may have for broker-dealers.
  • Hosted RegTech Conference in January 2019.
  • Hosted the FINRA Blockchain Symposium in New York in July 2017.
  • Hosted regional FinTech roundtables in San Francisco and Dallas during September 2017 and November 2017, respectively.
  • Established an ad hoc advisory committee, the FinTech Industry Committee, composed of committee members drawn from member firms, academia, and industry participants, plus observers from the SEC and North American Securities Administrators Association (NASAA). Held the inaugural meeting in October 2017.
  • Developed a training program for FINRA staff on FinTech-related matters.
  • Engaged in meetings and discussions with domestic and international regulators to address common regulatory issues related to FinTech.
  • Met with dozens of financial firms and technology vendors involved in the FinTech space to respond to inquiries and to seek greater understanding of developments in the industry, particularly related to regulatory technology (RegTech).