FINRA Forward’s Rule Modernization—An Update
modernization moving forward

By Robert Colby, Executive Vice President and Chief Legal Officer

Day after day, year after year, the roadways we drive seldom change. The main roads I drive near Washington, D.C. have been there since colonial days. We know by heart which highway exit takes us home, and that we have to signal, move to the right and slow down to make the turn. So the rules of the road hardly ever have to change—they are longstanding and familiar, and we rely on them as the backbone of an orderly system that helps us travel safely and efficiently. 

Wall Street is a very, very different road. It changes constantly. FINRA member firms are always evolving their products, practices and business models. The securities markets that FINRA oversees are highly dynamic. And the investors who literally and figuratively drive the Street are regularly adapting their strategies and behaviors as well.  As a result, FINRA cannot just “set and forget” our rules—we must constantly adapt them to changes in our membership and markets. 

In financial regulation, there is no higher purpose than helping investors participate in our markets with confidence. That participation drives wealth creation and capital formation. And though opinions may differ about the right amount of regulation, everyone acknowledges that effective and efficient rules help build trust for market participants and ultimately benefit FINRA member firms, the markets and the investors they serve.

Rules of the Road Ahead

Many of FINRA’s rules were established before today’s new technologies, investment products and hybrid workplaces, so it is time to modernize them. FINRA wants to ensure that in today’s environment and tomorrow’s, our rules help protect investors and safeguard market integrity without imposing unnecessary burdens on firms.

We often revisit our rules via a Retrospective Rule Review. This year we have expanded and accelerated that concept. As a pillar of the FINRA Forward initiative, we have opened up our whole rule book.

For starters, earlier this year, we issued three notices seeking comment: the first, on any aspect of our rules; the second, on rules relating to capital formation; and the third, on rules regarding the modern workplace.

We are committed to advancing this important work with all deliberate speed. For example, the Regulatory Policy Committee of our Board of Governors held an off-cycle meeting in July to review four rule proposals that otherwise would have had to wait until our September board meeting. These proposals address topics of keen interest to member firms and other interested parties:

  • Outside activities: In March, FINRA published Regulatory Notice 25-05 requesting comment on a proposal to simplify requirements regarding associated persons’ outside activities. By eliminating the needless reporting of unrelated activities, both the firms’ compliance staff and FINRA’s regulatory team can better focus on addressing actual risks. There were more than 200 comments which helped inform further refinements of the proposal. Following the July off-cycle committee meeting, the Board approved the revised proposal, for filing with the Securities and Exchange Commission.
  • Gifts influencing or rewarding employees of others: In May, FINRA filed proposed rule amendment 2025-003, raising the gift limit from $100 to $250 per person per year, addressing an ongoing pain point in everyday business. Following additional comments, the Board approved revising the gift limit to $300.
  • Capital acquisition brokers: In June, FINRA filed proposed 2025-005 to ensure that our rules relating to this growing number of specialized broker-dealers are efficient, effective, and support the capital-raising process without compromising investor protection. Following the July off-cycle meeting, the Board approved further amending the proposal. All of this follows input from a special advisory committee as well as comments responding to Regulatory Notice 20-04.
  • Capital formation: The Board approved rule amendments to facilitate various aspects of the corporate financing process, following comments received in response to Regulatory Notice 24-17.

Those are just a few of the current rulemakings associated with the FINRA Forward initiative. Other initiatives include updating our intraday margin rules; readdressing projections of performance; and obtaining relief from SEC staff to allow firms to rely on our Central Registration Depository for U4 filing records.

To stay up to date, visit FINRA.org to see each rule proposal and related comments, as well as the status of each proposal, and the latest requests for comment. Periodically, I will use this blog to update our progress in revising our rules.

An Engaging Opportunity

Keeping FINRA’s rules up to date amid an ever-changing landscape is an opportunity for engagement.

Engagement with FINRA member firms, the investing public and other interested parties is a defining benefit of America’s model of financial self-regulation. The dialogue helps inform FINRA’s decision making, whether those voices are heard at a meeting of an Advisory Committee or the Board of Governors, or through the comments we seek about our rules. Commenters bring their respective expertise to our discussions, providing their perspective on what works, what doesn’t, and what would have the desired effect of protecting investors without unintended negative impacts.

In response to our three recent notices, you have not disappointed. To date, we have received more than 125 written comments.

Thank you for your engagement. These comments are helping to inform our approach as we determine how best to prioritize our review.

As this process unfolds, FINRA values your ongoing participation. And while securities rulemaking can take time—months, sometimes years—drafting and iterating, seeking and reflecting on comments, working through multiple rounds of review and approval, this process helps ensure a considered outcome that is balanced and targeted.

I can tell you from experience that revising our rules can be a challenging road with many twists and turns. But the destination ultimately is rewarding: rules that better protect investors, support compliance by a vibrant FINRA membership and facilitate strong wealth creation and capital formation. We encourage our member firms and other interested parties to join us for each leg of this important journey, and we will keep you informed of our progress.