As part of its FINRA Forward initiative, FINRA recently released an independent review of its Enforcement Program conducted by Paul R. Eckert of William & Mary Law School and former SEC Commissioner Troy A. Paredes of Paredes Strategies. The review includes 23 recommendations aimed at improving the fairness, transparency, efficiency, and consistency of FINRA’s enforcement process. While the recommendations are not new rules or regulatory requirements, FINRA has indicated that it will carefully evaluate them as it considers future enhancements to its enforcement program.

Although many of the recommendations focus on FINRA’s internal processes, several could directly affect how firms interact with FINRA during examinations, investigations, and enforcement matters. Perhaps more importantly, the report offers compliance professionals an early look at where FINRA’s enforcement program may be headed, giving firms an opportunity to evaluate whether their own compliance processes are prepared for that direction.

Earlier Engagement During Enforcement Matters

One of the report’s most significant themes is expanding communication between FINRA and member firms earlier in the enforcement process. Rather than waiting until an investigation is well underway, the reviewers recommend expanding opportunities for firms to understand FINRA’s concerns and provide context earlier in the process.

Among the recommendations, firms could receive:

  • Written notification when a matter is referred to Enforcement, including the FINRA staff assigned to the matter.
  • Additional information regarding the potential rule violations being evaluated.
  • Greater opportunities to discuss the facts and FINRA’s concerns before an investigation progresses.
  • Continued status updates throughout an investigation.

The report also recommends limiting active participation by Enforcement staff during pre-referral examinations whenever possible. This would help preserve the collaborative nature of examinations before a matter formally moves into enforcement.

For firms, these recommendations reinforce the importance of being prepared to respond early when regulatory concerns arise. Maintaining organized supervisory documentation, exception reports, written supervisory procedures (WSPs), and supporting records can help firms provide meaningful context before an enforcement matter advances.

Enhancements to the Wells Process

One recommendation that could have a meaningful impact on firms involves FINRA’s Wells process. Many of these recommendations are designed to provide firms with greater transparency into FINRA’s reasoning while ensuring they have sufficient time and information to prepare a meaningful response.

Proposed enhancements include:

  • Publishing formal Wells procedures.
  • Providing a more detailed explanation of FINRA’s legal theories and investigative findings.
  • Offering greater access to supporting evidence and testimony transcripts.
  • Maintaining Wells response deadlines of at least 30 days in most circumstances.
  • Encouraging participation by senior Enforcement personnel during Wells meetings.
  • Providing clearer explanations of proposed sanctions, remediation expectations, and cooperation credit.

If adopted, these changes could provide firms with greater visibility into FINRA’s concerns before formal disciplinary action is pursued. That additional transparency also means firms should be prepared to thoroughly evaluate FINRA’s findings, organize supporting documentation, and coordinate closely with internal stakeholders and legal counsel when responding.

Proposed Changes to Rule 8210 Information Requests

Perhaps the most notable proposal in this section is establishing a formal process that would allow firms to challenge Rule 8210 requests they believe are overly broad or unnecessarily burdensome.

The reviewers recommend several enhancements, including:

  • Consulting with firms before issuing certain Rule 8210 requests to discuss scope, timing, and expectations.
  • Requiring senior-level approval of Enforcement information requests.
  • Setting response deadlines that reflect the complexity of gathering the requested information.
  • Tracking prior document productions to reduce duplicative requests.
  • Strengthening safeguards around attorney-client privilege and work product protections.
  • Limiting unnecessary post-Wells information requests.

Perhaps the most notable recommendation is establishing a formal process that would allow firms to challenge Rule 8210 requests they believe are overly broad or unnecessarily burdensome. While the report recognizes that such a process would require safeguards against abuse, it recommends creating a neutral forum to review extraordinary situations involving significant costs or burdens.

Whether or not these recommendations are ultimately adopted, they highlight the importance of maintaining organized books and records, documenting prior regulatory responses, and establishing internal procedures for coordinating Rule 8210 requests across compliance, legal, operations, and business units.

Greater Emphasis on Remediation and Cooperation

Another key takeaway from the report is FINRA’s continued emphasis on remediation and meaningful cooperation. The reviewers recommend expanding programs that allow certain matters to be resolved outside of formal enforcement proceedings while also providing greater transparency around how cooperation is evaluated.

Among the recommendations are:

  • Expanding the use of Rapid Remediation and similar compliance-focused initiatives.
  • Creating additional streamlined resolution options for technical violations that do not involve investor harm.
  • Encouraging earlier discussions regarding remediation expectations.
  • Providing greater transparency around how cooperation credit is awarded.
  • Recognizing meaningful cooperation beyond only “extraordinary” circumstances.

The report suggests that meaningful cooperation may take many forms, including promptly identifying compliance issues, implementing corrective actions, strengthening supervisory controls, making affected customers whole when appropriate, and working constructively with FINRA throughout an investigation.

For firms, these recommendations reinforce the value of documenting remediation efforts as compliance issues are identified. Maintaining records of policy revisions, supervisory enhancements, employee training, and corrective actions can help demonstrate a firm’s commitment to improving its compliance program.

Improving Enforcement Efficiency and Consistency

Several recommendations focus on improving the overall efficiency and consistency of FINRA’s enforcement process, but one proposal many firms will likely be watching closely involves the adoption of formal limitations periods for certain enforcement actions.

Among the proposed changes are:

  • Better tracking of enforcement matters from beginning to end.
  • Establishing milestones to reduce aging investigations.
  • Improving coordination among FINRA departments.
  • Reducing unnecessary duplication when another regulator is already pursuing substantially similar conduct.
  • Considering formal limitations periods for certain enforcement actions.

The reviewers make clear that these recommendations are not intended to reduce enforcement activity. Rather, they are intended to help FINRA resolve matters more efficiently while focusing resources on the issues that present the greatest risk to investors and the markets.

For compliance professionals, this serves as another reminder that documentation should be maintained continuously rather than assembled only after an examination or investigation begins. Well-organized compliance records, supervisory reviews, and documented corrective actions can help firms respond more efficiently regardless of how FINRA ultimately implements these recommendations.

Additional Recommendations to Watch

Several additional recommendations could also affect how firms interact with FINRA if implemented.

Publication of an Enforcement Manual

The report recommends that FINRA publish an updated Enforcement Manual outlining its guiding principles, policies, and procedures. Greater transparency into FINRA’s enforcement process could help firms better understand expectations throughout an investigation.

Publication of Enforcement Workflow Diagrams

The reviewers also recommend publishing workflow diagrams that explain how matters progress through FINRA’s enforcement process. This could provide compliance professionals with additional insight into what occurs after an examination or referral.

Improved Access to Disciplinary Decisions

The report recommends making FINRA disciplinary materials easier to search and access through both FINRA’s website and commonly used legal research platforms. Easier access could help firms benchmark their own compliance programs against recent enforcement trends.

Clarification Around Rule 2010 Charges and Sanction Guidelines

The reviewers recommend limiting certain “tag-along” Rule 2010 charges involving technical violations while also providing greater transparency around how sanctions are determined and how FINRA applies its Sanction Guidelines. If adopted, these recommendations could provide firms with greater clarity regarding how disciplinary outcomes are evaluated and communicated.

While it remains to be seen which recommendations FINRA ultimately adopts, the report offers valuable insight into the future direction of FINRA’s enforcement program. For firms, now is a good time to review internal compliance processes, supervisory documentation, remediation practices, and regulatory response procedures to help ensure they are well positioned should these recommendations become part of FINRA’s evolving enforcement framework.