We appreciate that FINRA is soliciting comment on how to modernize its regulatory framework in light of workplace evolution and technological change. While the opportunity to provide feedback is welcome, the timing of this initiative, coinciding with shifting political winds and broader deregulation narratives, raises serious concerns. There is a growing perception among member firms that this is not a genuine effort to reform but rather a reactive exercise designed to maintain relevance amid mounting pressure.
Let’s call it what it is. FINRA has long been stuck in a rigid, outdated mode of thinking that consistently lags behind the real-world evolution of the broker-dealer landscape. Instead of leading, it follows. Instead of anticipating change, it reacts with superficial policy shifts. And instead of partnering with its members, especially the small and mid-sized firms that make up the backbone of this industry, it imposes mandates from a distance, disconnected from the day-to-day realities we face.
FINRA’s Structure and Culture Are the Problem
At its core, FINRA continues to operate with a bloated infrastructure, maintaining a budget and executive pay structure that would be more fitting for a private, for-profit enterprise than a self-regulatory body. Senior management compensation levels are out of line with FINRA’s mission. These are not private equity executives. They are not running global investment banks. Yet their salaries and benefits packages suggest otherwise.
FINRA’s CEO earned roughly three point six million dollars in 2022, nearly fifteen times the compensation of the SEC Chair. This is not hypothetical bloat. It is real and documented in FINRA’s Form 990. As Rep. Maxine Waters pointed out during a December 2023 hearing, “FINRA, whose leadership is appointed by Wall Street, imposes weaker penalties compared to government regulators, lets broker misconduct go unchecked, permits board member conflicts of interest, and lacks any cap on executive compensation.”
The concern about excess is bipartisan. Rep. Ann Wagner, Chair of the House Capital Markets Subcommittee, added, “FINRA has devolved into an overzealous and unaccountable quasi-governmental entity that looks and acts a lot more like the SEC than the member-driven SRO that Congress originally established.” She concluded, “For too long, FINRA has escaped serious oversight. Those days are over.”
More troubling is the institutional hypocrisy that runs through FINRA’s regulatory posture. Member firms are required to maintain exacting standards around licensing, compliance, and continuing education. Our employees must sit for rigorous qualification exams and adhere to complex disclosure and registration requirements. Meanwhile, FINRA staff who oversee and enforce these rules are not subject to the same exams or continuing education demands. This disconnect undermines FINRA’s credibility. If your staff cannot or will not meet the same requirements imposed on the industry, how can you credibly supervise it?
This is not a theoretical concern. It plays out during exams and interactions, where member firms are scrutinized by examiners with limited or outdated industry experience, examiners who themselves are exempt from the standards they enforce. It sends the wrong message and reinforces the idea that FINRA is not aligned with the people it regulates but instead exists apart from them.
A “Membership” Organization in Name Only
The word “membership” implies representation, participation, and shared interest. But for those of us who have dealt with FINRA in any meaningful capacity, whether during a cycle exam, a rule interpretation, or a MAP review, the experience is anything but collaborative. Small and mid-sized firms are routinely subjected to arbitrary oversight, repetitive document requests, and a level of scrutiny that seems inversely proportional to our actual risk profile.
FINRA’s governance structure compounds the issue. Large firms dominate the dialogue. The board lacks meaningful representation from firms operating below the top tier. Rulemaking reflects the operational structure of the biggest players, not the diverse needs of the full membership. And feedback from smaller firms is often ignored or watered down in the final implementation.
The relationship is fundamentally imbalanced. FINRA’s actions frequently appear to be driven by reputation management, enforcement quotas, or political signaling, rather than a principled focus on investor protection and market integrity.
Enforcement as Theater
The recent wave of enforcement actions focused on “off-channel communications” illustrates this disconnect perfectly. Firms are being fined for using common tools like WhatsApp, tools their clients often prefer, and being penalized not for harming investors, but for failing to check a regulatory box in the approved format.
These are not investor protection victories. They are headlines. They allow FINRA to posture as a tough regulator, while real risks like fraud, conflicts of interest, or product complexity go unaddressed. This is not meaningful oversight. It is enforcement theater.
For example, in a 2024 case involving a Miami-based registered rep, FINRA suspended the individual for six months and fined him fifteen thousand dollars for communicating with clients on WhatsApp. In its own settlement document, FINRA stated that there was no fraud, no misrepresentation, and no customer harm.
The punishment was purely for using an unapproved communication platform. That is enforcement for enforcement’s sake.
As Andrew Stoltmann, a former public governor at FINRA, noted, “These recordkeeping charges are often just an add-on to other misconduct. But we are now seeing them being treated as standalone enforcement matters, which shows just how out of touch the priorities have become.”
The rules being enforced are often outdated or inconsistently applied. The solution is not to double down on enforcement for legacy infractions. It is to revisit and overhaul the rulebook to reflect how firms actually communicate, operate, and serve clients today.
Timing and Intent: Why Now?
The timing of this initiative does not inspire confidence. After years of rigidity and resistance to change, the sudden push to modernize comes just as regulatory winds begin to shift in Washington. It feels reactive, not strategic. The fact that FINRA is only now considering flexibility around hybrid work, remote supervision, and digital communications is telling.
These are not new developments. The world changed years ago. The industry has been adapting in real time. But FINRA has largely stood still, until now. The question many of us are asking is: why? Why this, why now, and what happens after the comment period ends? Will this feedback actually shape policy, or is this a box-checking exercise?
The concern is widely shared. During the same December 2023 hearing, Rep. Wagner said FINRA “imposes unnecessary and excessive costs and uncertainty on the industry.” These are not partisan talking points. They are observations rooted in years of growing frustration.
What Needs to Change
If FINRA is serious about modernization, it needs to start with its own structure and practices:
Streamline the rulebook. Eliminate legacy rules that no longer provide investor protection value. Prioritize clarity over complexity.
Reform the examination process. Exams should be risk-based, consistent, and proportional, not administrative marathons for low-risk firms.
Hold FINRA staff to the same standards as registered reps. If your staff are regulating the industry, they should be required to understand it through the same lens.
Revamp governance. Ensure meaningful representation from small and mid-sized firms across FINRA’s leadership, committees, and working groups.
Increase transparency. Make it clear how budgets are allocated, what enforcement funds are used for, and how senior compensation is determined.
Commit to accountability. Publish a roadmap with tangible modernization milestones and clear timelines.
Closing Thoughts
FINRA cannot earn the trust of its members by talking about modernization while clinging to outdated practices, rigid rule structures, and a regulatory culture that treats firms as adversaries. The credibility gap is real, and it is growing.
This comment process is an opportunity. But it must be the beginning of a much larger reckoning with FINRA’s structure, its culture, and its ability to serve the very firms it relies on for funding, legitimacy, and relevance.
We urge FINRA to listen closely, not just to the largest voices in the room, but to the firms that are actually on the ground, navigating these rules every day, building businesses, and serving clients in a modern financial ecosystem. That is where real modernization must begin.
For the Public
FINRA DATA
FINRA Data provides non-commercial use of data, specifically the ability to save data views and create and manage a Bond Watchlist.
For Industry Professionals
FINPRO
Registered representatives can fulfill Continuing Education requirements, view their industry CRD record and perform other compliance tasks.
For Member Firms
FINRA GATEWAY
Firm compliance professionals can access filings and requests, run reports and submit support tickets.
For Case Participants
DR PORTAL
Arbitration and mediation case participants and FINRA neutrals can view case information and submit documents through this Dispute Resolution Portal.
Need Help? | Check System Status
Log In to other FINRA systems
Anonymous Comment On Regulatory Notice 25-07
To the Financial Industry Regulatory Authority:
We appreciate that FINRA is soliciting comment on how to modernize its regulatory framework in light of workplace evolution and technological change. While the opportunity to provide feedback is welcome, the timing of this initiative, coinciding with shifting political winds and broader deregulation narratives, raises serious concerns. There is a growing perception among member firms that this is not a genuine effort to reform but rather a reactive exercise designed to maintain relevance amid mounting pressure.
Let’s call it what it is. FINRA has long been stuck in a rigid, outdated mode of thinking that consistently lags behind the real-world evolution of the broker-dealer landscape. Instead of leading, it follows. Instead of anticipating change, it reacts with superficial policy shifts. And instead of partnering with its members, especially the small and mid-sized firms that make up the backbone of this industry, it imposes mandates from a distance, disconnected from the day-to-day realities we face.
FINRA’s Structure and Culture Are the Problem
At its core, FINRA continues to operate with a bloated infrastructure, maintaining a budget and executive pay structure that would be more fitting for a private, for-profit enterprise than a self-regulatory body. Senior management compensation levels are out of line with FINRA’s mission. These are not private equity executives. They are not running global investment banks. Yet their salaries and benefits packages suggest otherwise.
FINRA’s CEO earned roughly three point six million dollars in 2022, nearly fifteen times the compensation of the SEC Chair. This is not hypothetical bloat. It is real and documented in FINRA’s Form 990. As Rep. Maxine Waters pointed out during a December 2023 hearing, “FINRA, whose leadership is appointed by Wall Street, imposes weaker penalties compared to government regulators, lets broker misconduct go unchecked, permits board member conflicts of interest, and lacks any cap on executive compensation.”
The concern about excess is bipartisan. Rep. Ann Wagner, Chair of the House Capital Markets Subcommittee, added, “FINRA has devolved into an overzealous and unaccountable quasi-governmental entity that looks and acts a lot more like the SEC than the member-driven SRO that Congress originally established.” She concluded, “For too long, FINRA has escaped serious oversight. Those days are over.”
More troubling is the institutional hypocrisy that runs through FINRA’s regulatory posture. Member firms are required to maintain exacting standards around licensing, compliance, and continuing education. Our employees must sit for rigorous qualification exams and adhere to complex disclosure and registration requirements. Meanwhile, FINRA staff who oversee and enforce these rules are not subject to the same exams or continuing education demands. This disconnect undermines FINRA’s credibility. If your staff cannot or will not meet the same requirements imposed on the industry, how can you credibly supervise it?
This is not a theoretical concern. It plays out during exams and interactions, where member firms are scrutinized by examiners with limited or outdated industry experience, examiners who themselves are exempt from the standards they enforce. It sends the wrong message and reinforces the idea that FINRA is not aligned with the people it regulates but instead exists apart from them.
A “Membership” Organization in Name Only
The word “membership” implies representation, participation, and shared interest. But for those of us who have dealt with FINRA in any meaningful capacity, whether during a cycle exam, a rule interpretation, or a MAP review, the experience is anything but collaborative. Small and mid-sized firms are routinely subjected to arbitrary oversight, repetitive document requests, and a level of scrutiny that seems inversely proportional to our actual risk profile.
FINRA’s governance structure compounds the issue. Large firms dominate the dialogue. The board lacks meaningful representation from firms operating below the top tier. Rulemaking reflects the operational structure of the biggest players, not the diverse needs of the full membership. And feedback from smaller firms is often ignored or watered down in the final implementation.
The relationship is fundamentally imbalanced. FINRA’s actions frequently appear to be driven by reputation management, enforcement quotas, or political signaling, rather than a principled focus on investor protection and market integrity.
Enforcement as Theater
The recent wave of enforcement actions focused on “off-channel communications” illustrates this disconnect perfectly. Firms are being fined for using common tools like WhatsApp, tools their clients often prefer, and being penalized not for harming investors, but for failing to check a regulatory box in the approved format.
These are not investor protection victories. They are headlines. They allow FINRA to posture as a tough regulator, while real risks like fraud, conflicts of interest, or product complexity go unaddressed. This is not meaningful oversight. It is enforcement theater.
For example, in a 2024 case involving a Miami-based registered rep, FINRA suspended the individual for six months and fined him fifteen thousand dollars for communicating with clients on WhatsApp. In its own settlement document, FINRA stated that there was no fraud, no misrepresentation, and no customer harm.
The punishment was purely for using an unapproved communication platform. That is enforcement for enforcement’s sake.
As Andrew Stoltmann, a former public governor at FINRA, noted, “These recordkeeping charges are often just an add-on to other misconduct. But we are now seeing them being treated as standalone enforcement matters, which shows just how out of touch the priorities have become.”
The rules being enforced are often outdated or inconsistently applied. The solution is not to double down on enforcement for legacy infractions. It is to revisit and overhaul the rulebook to reflect how firms actually communicate, operate, and serve clients today.
Timing and Intent: Why Now?
The timing of this initiative does not inspire confidence. After years of rigidity and resistance to change, the sudden push to modernize comes just as regulatory winds begin to shift in Washington. It feels reactive, not strategic. The fact that FINRA is only now considering flexibility around hybrid work, remote supervision, and digital communications is telling.
These are not new developments. The world changed years ago. The industry has been adapting in real time. But FINRA has largely stood still, until now. The question many of us are asking is: why? Why this, why now, and what happens after the comment period ends? Will this feedback actually shape policy, or is this a box-checking exercise?
The concern is widely shared. During the same December 2023 hearing, Rep. Wagner said FINRA “imposes unnecessary and excessive costs and uncertainty on the industry.” These are not partisan talking points. They are observations rooted in years of growing frustration.
What Needs to Change
If FINRA is serious about modernization, it needs to start with its own structure and practices:
Closing Thoughts
FINRA cannot earn the trust of its members by talking about modernization while clinging to outdated practices, rigid rule structures, and a regulatory culture that treats firms as adversaries. The credibility gap is real, and it is growing.
This comment process is an opportunity. But it must be the beginning of a much larger reckoning with FINRA’s structure, its culture, and its ability to serve the very firms it relies on for funding, legitimacy, and relevance.
We urge FINRA to listen closely, not just to the largest voices in the room, but to the firms that are actually on the ground, navigating these rules every day, building businesses, and serving clients in a modern financial ecosystem. That is where real modernization must begin.