External Review Recommends Sweeping Changes to FINRA Enforcement Program

On June 30, the Financial Industry Regulatory Authority (FINRA) published an outside expert report setting forth significant recommendations for the management, investigation, review, and resolution of enforcement matters.  FINRA commissioned the review in July 2025 as part of its FINRA Forward modernization initiative, retaining Professor Paul Eckert of William & Mary Law School and former SEC Commissioner Troy Paredes to evaluate opportunities for  “meaningful, common-sense improvements” to FINRA’s enforcement program. 

A unifying theme of the report is that FINRA’s enforcement process should better reflect its role as a self-regulatory organization through earlier engagement, clearer and documented procedures, and more disciplined use of enforcement tools.  Many proposals build on enhancements FINRA has already begun to implement, including more frequent status updates, earlier meetings with firms after referral to Enforcement, and additional opportunities for firms to engage before a formal enforcement action is proposed.

Key Takeaways

• Greater Procedural Leverage for Firms. The report proposes a new forum to challenge overbroad Rule 8210 requests, published procedures including written Wells procedures with a guaranteed 30-day response window, and earlier engagement when a matter is referred to Enforcement.
• Longstanding Industry Concerns Addressed. The report recommends adoption of limitations periods, curbing “tag-along” Rule 2010 charges, and increased application of cooperation credit.
• FINRA Implementation. FINRA has not yet directly addressed the recommendations in the report, but some of the recent enhancements announced through the FINRA Forward initiative are consistent with the recommendations and areas of focus in the report.  Firms with active or anticipated matters should evaluate these recommendations and how they might inform engagement, cooperation, and resolution strategy.

Key Recommendations

Governance and Transparency 

The report questions the current process of recusing FINRA’s CEO from involvement in specific enforcement matters and recommends that the CEO be more actively involved in certain matters or categories of matters. 

Likewise, the report recommends that FINRA reconsider the National Adjudicatory Council (NAC) delegation of authority to review proposed settlements and complaints to the existing Office of Disciplinary Affairs and consider categories of cases for which the NAC should retain review and approval authority.  

On transparency, the authors call for a public Enforcement Manual; published enforcement workflow diagrams; better access to and searchability of disciplinary materials; expedited tracks for technical matters that do not involve investor harm; and expanded use of Rapid Remediation, surveillance, and detection.  FINRA has announced plans to publish an enforcement manual and update publicly available information about the enforcement process.

Reining in “Tag-Along” Rule 2010 Charges

The report recommends limiting the use of companion, or “tag-along,” charges under FINRA Rule 2010 where the alleged Rule 2010 violation is based solely on another rule violation that does not itself involve fraudulent or unethical conduct.

The inclusion of tag-along Rule 2010 charges has long been a concern to the industry.  The authors’ stated concern is that attaching Rule 2010 to technical or nonintentional violations may overstate the ethical severity of the conduct and dilute the force of Rule 2010 in cases involving more serious misconduct. 
Adoption of Limitation Periods

The report recommends that FINRA adopt “appropriate limitations periods” for enforcement matters.  The lack of a statute of limitations has frequently frustrated broker-dealers who see investigations drag on for many years, sometimes without any meaningful investigative activity.  FINRA is notably not subject to any statute of limitations in the same way government enforcement agencies are.

For charges tied to the federal securities laws or FINRA rules incorporating those laws, the report suggests that FINRA follow the corresponding federal limitations periods.  For other matters, they suggest a five-year period, subject to exceptions such as tolling, continuing violations, and longer periods for scienter-based fraud or manipulation involving customer loss. 

A Forum to Challenge Rule 8210 Requests

One of the report’s most significant recommendations concerns the creation of a formalized review process to challenge the scope of FINRA Rule 8210 information requests.  Under the proposal, firms could seek review of requests perceived to be inappropriate because of their scope or burden.

The report recommends the appointment of a neutral decision-maker, such as a hearing officer or a retired judge in a newly created role.  The authors also recognize the need for safeguards, including an exigent-circumstances exception, a requirement that firms first escalate the issue to the Head of Enforcement, possible administrative fees, and sanctions for frivolous challenges.  

Broader Rule 8210 and Information-Request Limits

The report also recommends against Rule 8210 requests including contention interrogatories and requests for admissions, and requests that call for memorializing recollections, explaining circumstances surrounding an event, or stating positions as to legal or factual defenses at an early stage in an investigation without a developed factual record or meaningful opportunity to refresh memories of long-past events. 

Additionally, the report recommends that Rule 8210 requests receive manager-level approval and that the Staff engage in preissuance consultation with member firms on scope and timing, tracking to curb duplicative requests, and practical response deadlines.  FINRA already has implemented preissuance consultations in nonexigent circumstances.

A Strengthened, Published Wells Process 

The report urges FINRA to formalize and publish enhanced Wells procedures to bolster due process and transparency.  The suggested enhancements include reverse proffers and other “open jacket” practices, more meaningful explanations of Staff’s factual and legal theories, access to on-the-record testimony transcripts and exhibits upon issuance of a Wells notice, a minimum 30-day response period absent extraordinary circumstances, attendance by senior Enforcement personnel at Wells meetings, and post-Wells meetings with Enforcement leadership.  FINRA recently implemented a 30-day minimum Wells response period.

Earlier Engagement at the Time of Referral 

Another recommended change is more substantive engagement when a matter is referred to Enforcement.  Respondents would receive written notice of the referral, the names and roles of assigned Enforcement Staff, the nature of Staff’s concerns, and the potential violations that prompted the referral.

The authors also propose a structured opportunity for firms to present their views before the enforcement matter begins to take final shape.  This builds on changes FINRA has already started to make, including introductory meetings with assigned Staff at the outset of Enforcement matters and an additional meeting near the conclusion of an investigation before formal charges are proposed where member firms can provide their views of the facts and evidence. 

Reworked Cooperation Credit 

The authors also call for updated, published guidance on cooperation credit.  In particular, they recommend clarifying that cooperation need not be “extraordinary” to receive credit and that credit should not automatically be unavailable simply because a firm had a self-reporting obligation or undertook remediation that could be viewed as expected or routine. FINRA has already committed to issuing clarifying guidance for cooperation credit and remediation.

They also urge greater transparency around how cooperation credit is awarded, including fuller explanations in letters of acceptance, waiver, and consent (AWCs).

Reduced Duplication With Other Regulators 

The report encourages FINRA to update its policies and procedures to avoid duplicative enforcement efforts where another regulator, such as the SEC, Commodity Futures Trading Commission, Financial Crimes Enforcement Network, Department of Justice, or a state regulator, is pursuing similar conduct and a FINRA action would not add meaningful incremental value.

Settlement and Sanctions Discipline 

Several recommendations address settlements, sanctions, and informal resolutions.  These include consistent application of the Sanction Guidelines to settlements, documentation and approval of departures from those guidelines, fuller context in AWCs, and an opportunity for respondents to include mitigating information in a way that helps readers understand the conduct and sanctions.

The report also proposes expanding FINRA’s Minor Rule Violation (MRV) Plan to cover additional rules and increasing MRV fine levels, so that more matters — particularly technical or administrative violations without investor harm — can be resolved efficiently.  Additionally, the report recommends advance discussion of Cautionary Action Letters, a change FINRA recently implemented, and additional process around draft MC-400A membership continuance applications where contemplated settlements with other regulators may trigger statutory disqualification issues.

What This Means for Firms

FINRA has signaled a measured, multistage approach to implementation, and some changes may fold into its broader Regulatory Operations restructuring.  But the direction of travel is clear: more procedural protection, more transparency, and a self-regulatory posture oriented toward resolving compliance issues more efficiently.

Firms and individuals with active or anticipated FINRA matters should watch closely for how these recommendations are implemented and consider how they may affect engagement strategy, information-request responses, Wells submissions, cooperation credit, and resolution discussions.