Dual registrant regulatory roundup - July 2026

FINRA issues guidance on application of FINRA rules to SEC no-action letter on personal services entities (Regulatory Notice 26-12)

• On June 9, FINRA published Regulatory Notice 26-12, providing guidance regarding the manner in which FINRA rules apply in relation to the November 2025 SEC staff no-action letter permitting registered representative-owned personal services entities (PSEs) to receive transaction-based compensation (TBC) without broker-dealer registration, subject to conditions. FINRA notes that the Notice does not apply new requirements beyond the no-action letter requirements and that members may apply the guidance to PSE arrangements entered into on or after November 17, 2025, the date upon which the no-action letter was issued.
• The 2025 no-action letter permits broker-dealers to pay TBC directly to PSEs without separate PSE registration under the Securities Exchange Act of 1934, as amended (the Exchange Act), provided that, among other conditions: (1) each owner of the PSE is a registered person of the broker-dealer; (2) the PSE's location is designated as a branch office or OSJ; (3) the PSE promptly distributes TBC to the registered representatives upon receiving instructions or approval from the broker-dealer (though the PSE may retain a portion for overhead and administrative expenses); (4) and the broker-dealer maintains policies and procedures designed to ensure the conditions of the no-action letter are satisfied. The broker-dealer and PSE must also enter into a written servicing agreement addressing, among other things, the broker-dealer's sole and exclusive control over the day-to-day securities-related activities of its associated persons and the PSE's obligation not to engage in securities-related activities that would require broker-dealer registration.
• The Notice addresses the application of several FINRA rules, including Rule 2040 (Payments to Unregistered Persons), Rules 2320 and 2341 (relating to variable contracts and investment company securities compensation), Rule 3110 (Supervision) and Rule 2210 (Communications with the Public). FINRA confirmed that members that wish to pay TBC to a PSE pursuant to the 2025 no-action letter, and associated persons who wish to receive TBC from the PSE, will satisfy Rules 2040, 2320 and 2341 by complying with the conditions of the no-action letter.

Join Eversheds Sutherland for the first session in our Dual-registrant webinar series, where we will examine recent SEC guidance on personal services entities and its implications for financial adviser-owned entities receiving transaction-based compensation. Speakers Clifford Kirsch and Issa Hanna will discuss key structuring, supervision and conflict considerations, along with practical steps firms should consider now. Register here: Dual-registrant webinar series: Join us for navigating SEC and related guidance on personal services entities – July 9.

SEC sends e-delivery proposal to White House for review

• In June, the SEC sent its proposed rule on electronic delivery of information under the federal securities laws to the White House Office of Information and Regulatory Affairs (OIRA) for review—the final stop in the federal rulemaking process before publication. While the filing offers no details about the proposal itself, its arrival at OIRA signals the SEC is nearing a formal proposal on one of the industry's longest-running priorities.

SEC exam staff issue Risk Alert on investment adviser obligations related to economic conflicts of interest

• On June 9, the SEC's Division of Examinations published a Risk Alert to assist advisers in developing effective compliance programs and disclosures with respect to economic conflicts of interest. The Risk Alert addresses observations made by SEC staff during review of the economic incentives that advisers and their financial professionals may have to recommend certain products, services or account types to their clients, including the source and structure of compensation, revenue or other economic benefits.
• The Risk Alert identifies several categories of examination observations, including: (1) conflicts of interest associated with advisers' cash management recommendations, where advisers received revenue in exchange for recommending programs under which clients' uninvested cash was moved into interest-bearing accounts (some held at affiliated parties) without full and fair disclosure of the resulting economic conflicts; (2) conflicts associated with mutual fund share class selection, where advisers recommended share classes that paid the adviser (as a dually registered broker-dealer), its related entities or its individual adviser representatives Rule 12b-1 fees when a lower-cost share class for the same fund was available; and (3) instances where advisers assessed client advisory fees that were inconsistent with advisory agreements, disclosures or both, including fee calculations not aligned with Form ADV disclosures and the terms of written advisory agreements.
• The Risk Alert also identifies observations regarding advisers' compliance programs, including instances where written policies and procedures did not fully address the advisers' billing practices or did not include controls to monitor for accurate fee calculations and billing. The Division noted that examination findings have often led to advisers returning money owed to clients due to fee billing and calculation errors, and that advisers have improved the clarity of their disclosures, the accuracy of their billing practices and the effectiveness of their compliance programs in response to examinations.

FINRA Board of Governors approves rule proposals and updates quarterly policy agenda

• On June 11, FINRA reported that its Board of Governors met on June 3rd and 4th and approved four rule proposals, each of which will be filed with the SEC. The four proposals—covering remote inspections, modernized supervision and non-branch location requirements, continuing education and corporate financing modernization—reflect feedback from the FINRA Forward rule modernization initiative.
• The remote inspections proposal would make permanent the Remote Inspections Pilot Program before it expires. The modernized supervision proposal would extend the presumptive inspection cycle for non-branch locations, simplify the approach for different types of residences and modify the supervisory ineligibility requirement for Residential Supervisory Locations. The continuing education proposal addresses the CE workload for individuals with multiple registrations, provides timing flexibility for compliance with CE deadlines and offers a new voluntary pilot for CE delivery to senior leaders. The corporate financing proposal would modernize the treatment of underwriting compensation, simplify compliance for members with conflicts of interest in public offerings and expand the filing exemption for certain private placements.
• FINRA also published its updated Quarterly Policy Agenda on June 10, 2026. Among the current priorities on the agenda are: (1) a regulatory notice requesting comment on modernizing the rules governing communications with the public (Q2 2026); (2) a regulatory notice on modernizing best execution guidance under Rule 5310 (Q3 2026); (3) a rule proposal to be filed with the SEC to amend Rules 4512 and 2165 and adopt new Rule 2166 relating to senior investors and fraud protection (Q3 2026); (4) modernization of rules governing membership applications (Q4 2026 and following); (5) modernization of supervision rules relating to branch offices (Q4 2026 and following); (6) consideration of steps to deter account transfer fraud (Q1 2027 and following); and (7) facilitating default electronic delivery of information to customers (timing pending SEC action).

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