A Progress Update on Rule Modernization

By Robert Colby, Chief Legal Officer

Rulemaking is more like Formula 1 than drag racing. F1 drivers must continually adjust their speed on the circuit, slowing down on curves and accelerating on the all-too-rare straightaways. All the while, they look ahead to anticipate obstacles and react to other drivers. 

When we launched our FINRA Forward rule modernization initiative a year ago, we knew that we, too, would navigate some twists and turns—and occasionally downshift—to make progress on our course of modernizing our rules while continuing to protect investors. 

Revising financial rules so they remain targeted and effective is rarely a straightaway. It involves research, engagement, drafting, and re-drafting, all with a dose of humility. Proposed changes must be authorized by our Board and then filed with the Securities and Exchange Commission (SEC). 

Today, I am glad to report that we have crossed the finish line on several highly ranked circuits. Specifically, we raised the gift limit to $300 per person annually; modified requirements for capital acquisition brokers (CABs) to promote capital formation; and addressed the use of negative consent in the bulk transfer of customer accounts.

These topics drew considerable feedback in our three rule modernization notices seeking comment last year (available here, here, and here). But they are not the only circuits on our calendar, and we continue our efforts to update other aspects of our rules. To help you keep track of our progress, I am providing the following overview highlighting our work since my last update in September.

Completed Work (listed by date of rule change or publication of guidance)

The following rule changes and guidance are final:

• Gift Limit. Rule amendments approved by the SEC on Feb. 12 to raise the gift limit from $100 to $300 per person per year, and to incorporate and codify current guidance and interpretations. These changes address an ongoing pain point in everyday business.
• Capital Acquisition Brokers. Rule amendments approved by the SEC on Feb. 10 to support the growth of these specialized broker-dealers. CABs are now permitted to represent buyers as well as sellers in specified private placement and M&A transactions. This may encourage more unregulated firms to register as CAB status, benefitting these firms and investors alike.
• Negative Consent. New FINRA guidance issued on Feb. 6 regarding the bulk transfer or assignment of customer accounts by negative consent in exigent circumstances. Members may now use negative consent letters without obtaining the staff’s “no objection” to the proposed transfer or assignment of customers’ accounts by negative consent.  We also consolidated previously issued guidance on when negative consent may be used and provided members with effective practices to help inform the use of negative consent in future bulk transfers or assignments.
• Interpretations of Financial and Operational Rules. Additional SEC guidance incorporated in January in our Interpretations of the SEC’s Financial and Operational Rules page on FINRA.org. This continues our efforts to update and modernize this key resource, which helps member firms comply with SEC rules for calculating net capital and protecting customer assets.
• Direct Participation Programs (DPPs). New FINRA guidance published in August and December 2025 addressing discretionary transactions in DPP offerings and the application of the DPP requirements to limited liability companies.
• No-Action Relief for Form U4 Filings. Notice on Oct. 10, 2025, informing firms that they may now rely on the Central Registration Depository for electronic U4 filing records. 

In Progress (listed by date of filing)

We have filed the following rule amendments for approval with the SEC:

• Performance Projections. Filed with the SEC on Feb. 10 to better align the regulatory requirements for broker-dealers and investment advisers for projections of performance and targeted returns in written communications to investors.
• Capital Formation. Filed with the SEC on Jan. 22 to facilitate various aspects of the corporate financing process. These amendments address comments received in response to Regulatory Notice 24-17.  
• Outside Activities. Filed with the SEC on Jan. 22 to simplify our outside activities requirements by eliminating the coverage of non-investment-related activities. To address concerns raised in response to Regulatory Notice 25-05, we modified our earlier proposal to remove the supervisory and recordkeeping requirements for outside unaffiliated investment adviser activity while maintaining notice and assessment obligations.
• Intraday Margin. Filed with the SEC on Dec. 29, 2025, to replace the current day trading margin provisions with updated intraday margin standards. These amendments would eliminate the longstanding designation of “pattern day traders” and the accompanying $25,000 minimum equity requirement while also reducing the risks of intraday trading exposures more broadly.

While we are driving at speed, there is more road before us. Immediately ahead are proposals to be considered by our Board in early March that would: 

• revise waiting periods before re-taking qualification exams;
• require FINRA to deliver electronically to firms through existing systems requests for information and testimony;
• ease operational challenges around allocation of orders from investment advisers for multiple accounts;
• provide parties with greater input into selecting replacement arbitrators; and
• simplify requirements to count and reconcile security holdings, expanding on a recent interim FAQ. 

Other circuits include providing member firms with more tools to proactively protect seniors, vulnerable adults and other customers from fraud and exploitation; examining changes to ease the electronic delivery of required information to customers under FINRA rules; addressing the treatment of collective trust funds under the new issue rules; and further expanding the facility hours for reporting overnight trades. We have also engaged with firms through roundtables on the key topics of modern communications, cybersecurity, fraud prevention, and the research rules.

To help you track our progress and priorities, I invite you to review a new Quarterly Regulatory Policy Agenda, which we recently published for the first time and will update quarterly. The agenda contains three tables: our current areas of focus, active rule filings and recently approved or immediately effective rule filings. You may also visit our Rule Filing Status Report for up-to-date information on key dates and milestones for recent rule filings.

In addition, today we published a regulatory notice on key areas of concern relating to our arbitration forum, intended to ensure our forum is fair and efficient for all users. This notice opens for all the opportunity to comment on a number of specific issues raised by those who have commented previously, including forum selection, punitive damages, motions to dismiss, as well as arbitrator qualifications and training. Many of these issues have been discussed in connection with the forum for years and would benefit from additional input regarding modern practices and how the forum works today for participants. 

Engaging with Us

The success of our rule modernization efforts depends on engagement with our member firms, the investing public, fellow regulators, and other interested parties. Our American model of financial self-regulation is well suited to fostering this dialogue, and we hope to hear from you. To that end, we have created an on-demand webinar to demystify the notice and comment process and explain how we incorporate your feedback. 

Comment letters are not the only way to make your voice heard. We also encourage member firms and investors to propose ideas through our various advisory committees and regional committees, or in direct conversations with our staff. 

Our FINRA Forward rule modernization initiative is an ongoing effort to evolve with today’s fast-changing securities industry and markets. Though we are pleased with our pace, we have many more laps to go. By working together, I am confident that we will take the checkered flag—that is, arrive at rules that enhance protections for investors, promote fair and resilient markets, and support strong wealth creation and capital formation. I will continue to keep you updated on our progress.