Strengthening Our Exam Program Through Innovation and Transparency

By Jim Reese, Executive Vice President, Head of Examinations

As the frontline regulator for broker-dealers, FINRA oversees member firms for compliance with federal securities laws and FINRA rules. As a self-regulatory organization, we are uniquely positioned to work collaboratively with our members to empower compliance, protect investors, and resolve issues early before formal enforcement action becomes necessary. Examinations are a cornerstone of this oversight, as we inspect approximately 1,000 member firms a year. The goal: to identify and address issues before they might harm investors, members, or markets.

As part of our FINRA Forward initiative, we introduced several changes aimed at making exams more transparent, efficient, and risk-based. These changes better support compliance and focus our resources on the highest risks. The changes are informed by member feedback and coupled with our new internal Regulatory Operations reporting structure that unifies the functions of Risk Monitoring and Intelligence, Surveillance, Examinations, Investigations, and Enforcement. As discussed further below, we are working to integrate these programs more fully.

A More Transparent Process

We believe our oversight efforts always are enhanced by providing members with greater transparency throughout the exam process. In response to member feedback, in early 2026, we began contacting members with exams scheduled for this year with advance notice of the quarter in which their exam is expected to be announced. This gives members more time to prepare and allocate resources. With two recently published resources, we also are giving members more insight into how we assess risk, categorize member firms, and approach our exams.

Risk-Informed Examinations

Our improvements to exams under FINRA Forward are guided by two principles. First, exams must be effective—rigorous enough to spot and address problems before they might harm investors or markets. At the same time, they must be efficient—not unnecessarily tax members or FINRA resources.

To that end, we adjusted our examination schedules earlier this year to better account for a member firm’s risk profile. FINRA has long based the frequency of exams on various risk factors, with the longest interval being four years. Informed by that experience and a review of the data, certain lower-risk member firms will now be examined every six years, while remaining subject to ongoing risk monitoring to determine whether more frequent examinations are warranted. This approach frees up resources for us to deploy against more significant risks to investors and markets.

We have also refined our approach for initial examinations of newly approved member firms. Broadly, FINRA is mandated by federal securities laws to conduct an initial exam within the first six months after a firm is approved for membership. We are now drawing more heavily on information gathered during the membership application review process to better tailor the scope of a firm’s first exam to focus on higher-risk areas. 

At the same time, we streamlined the data requests we make to our member firms by leveraging information already available through our regulatory programs. The results have been significant: Total external data requests in 2025 were down 12% over the prior year, while policy-driven initial trade blotter requests dropped by more than 50% in the same period. 

Expanding the Information Exchange

Throughout the exam process, it is crucial that members have the opportunity to provide information about their business and practices to our examiners. This helps us better understand member firms’ operations and how they manage and mitigate risk. 

To foster this dialogue, members now have the option to receive preliminary findings in writing throughout the examination, allowing them to address issues or provide additional information earlier in the process, which can be considered in the ultimate disposition of any findings.

This new preliminary-findings feature is proving popular. Since we introduced it in March, the majority of members who specified their preference have requested preliminary exam findings. Members also may choose to continue receiving a consolidated report of all findings at the exam’s conclusion. After the exam, the risk monitoring analyst remains a resource to continue conversations about actions the member is taking to address issues.

Changing How We Work

These enhancements coincide with the broader reorganization of our core regulatory functions—Risk Monitoring and Intelligence, Surveillance, Examinations, Investigations, and Enforcement—into a integrated Regulatory Operations single reporting structure to promote deeper internal information sharing and coordination around member firm-level issues. Our examination teams have long worked hand in hand with our risk monitoring teams to understand the risks facing individual member firms and appropriately scope exams. The new Regulatory Operations structure builds on this partnership.

Tighter integration has particular resonance for our exam function. Our examiners are now better positioned to reduce regulatory duplication for members and overlapping information requests. They have greater opportunity to give members credit for addressing issues. And they are better equipped to identify emerging issues sooner, especially where an issue might affect a broader swath of member firms.

When insights from our work with one member spotlight issues relevant to other members, we create a feedback loop. FINRA proactively shares the issue—but never proprietary information—across our membership to help members spot and mitigate risks before they escalate. For example, we are aiming to synthesize exam intelligence and report the findings more frequently to members. 

Looking Ahead

Our longer-term vision for examinations is shaped around automated processes designed to shorten timelines, reduce broad and labor-intensive data requests, and minimize operational disruption. We will also harness AI capabilities—for example, a tool to speed the analysis of Written Supervisory Procedures, the lengthy documents explaining a member firm’s protocols and controls that are foundational to our exams. 

Member feedback remains a key ingredient as we continue to evolve our examination function to bring further transparency, efficiency, and engagement. We welcome continued dialogue with members about their exam experience, and we plan to provide additional resources on effective practices and other observations.