FINRA enforcement program external review:

The Report sets forth 24 principal recommendations, organized by theme and accompanied by detailed subparts, addressing governance, transparency, due process, coordination, and operational efficiency within FINRA’s Enforcement Department (Enforcement). FINRA’s President and CEO, Robert W. Cook, released a contemporaneous letter welcoming the recommendations and committing FINRA to consider them “both individually and holistically.”

FINRA has already implemented or announced a number of enhancements aligned with the Report’s recommendations, including introductory meetings at the time of referral to Enforcement, mandatory 90-day status updates, pre-Wells investigative findings meetings, a Rule 4530(b) self-reporting pilot program, pre-Cautionary Action Letter outreach, pre-Rule 8210 outreach, and a 30-day Wells response period, as discussed in our prior client alert FINRA’s Enforcement Program Enhancements: A Roadmap for Firms (March 6, 2026). The Report builds on these enhancements and recommends a broader set of procedural and structural reforms.

This alert summarizes the recommendations most relevant to member firms’ day-to-day interactions with FINRA Enforcement, provides practical guidance on how firms and their counsel may want to prepare for these proposed changes, and identifies the most consequential broader policy recommendations.

I. Background

In July 2025, as part of its FINRA Forward initiative, FINRA engaged Professor Eckert and Commissioner Paredes to conduct an independent review of FINRA’s Enforcement Department. Their mandate was to identify opportunities for “meaningful, common-sense improvements” to FINRA’s enforcement program, with the overarching goal of better serving FINRA’s self-regulatory mission of protecting investors, safeguarding market integrity, and supporting vibrant capital markets.

The scope of the review encompassed governance, policies, processes, communications, and how Enforcement works with other FINRA departments and with federal and state regulators. Certain areas (including examinations, surveillance, hearings, arbitration, judicial review, and non-Enforcement functions within Regulatory Operations) fell outside the review. Professor Eckert and Commissioner Paredes did not conduct a data-driven audit or systematic reevaluation of FINRA’s rulebook; instead, their recommendations are grounded in extensive stakeholder feedback from FINRA leadership, board members, advisory committees, member firms, trade associations, state regulators, investor advocacy groups, and enforcement practitioners (including attorneys from Eversheds Sutherland), together with FINRA-provided materials and the reviewers’ own professional experience and judgment.

The resulting Report contains 24 principal recommendations (many with detailed subparts), organized under the headings of Management, Governance, and Oversight; Diverse Input, Perspectives, and Expertise; Due Process and Fairness; Transparency; Information Requests and Testimony; Coordination; Timeliness and Efficiency; Settlements, Resolution, and Advancing FINRA’s Mission; and Change Management, Assurance, and Continuous Improvement. In considering whether to implement the recommendations, FINRA’s CEO, Mr. Cook stated that FINRA will be guided by several themes, including the distinct self-regulatory organization (SRO) model, coordination across regulatory functions, clearly articulated enforcement principles, and enhanced CEO involvement in internal operations and decision-making.

II. Top 10 Recommendations with the Greatest Day-to-Day Impact on Enforcement Investigations

The following recommendations are presented in approximately the order in which they would arise during the life cycle of an enforcement matter—from pre-referral activity through resolution. For each recommendation, we provide a summary of the proposed change and practical considerations for firms and their counsel. Because many of these procedural enhancements remain recommendations under FINRA’s consideration rather than adopted policy, the practical considerations provided below are preparatory and apply only if FINRA formally adopts the corresponding recommendation.

Implementation also may vary because the Report itself recognizes that FINRA will make choices about how to implement recommendations, may consider them holistically, and may adopt reasonable exceptions where necessary to safeguard investors or markets.

1. Pre-Referral Enforcement Involvement and Early Alternatives to Formal Enforcement (Recommendations 14 and 19)

What’s New: The Report recommends that active attendance and participation by Enforcement Staff in meetings and communications with member firms during pre-referral examinations, reviews, and investigations be avoided absent exigent circumstances. The reviewers found that identifiable Enforcement presence during routine examinations can lead firms to perceive that a matter is already “in enforcement,” fundamentally changing the dynamic, increasing costs, and making it more difficult to reach a non-enforcement resolution. Separately, the Report recommends expanding the Rapid Remediation program, report cards, and similar alternatives to formal enforcement as pre-referral resolution mechanisms, with FINRA tracking and periodically publishing information about how frequently these alternatives are utilized and the outcomes they produce.

Practical Considerations: During a routine examination, a firm may choose a more collaborative and cooperative approach, whereas during an investigation involving Enforcement, a firm may need to take a more assertive and strategic approach in presenting facts, legal arguments, and mitigating considerations. In light of the Report’s recommendation that active Enforcement participation in pre-referral examinations be limited, firms that observe identifiable Enforcement involvement may consider requesting clarification regarding the purpose and scope of that involvement and whether the matter remains under examination rather than enforcement review. Counsel may also evaluate whether to raise concerns through appropriate FINRA supervisory channels while maintaining a clear record of relevant communications. Firms may also benefit from engaging proactively with rapid-remediation pathways where available and appropriate.

2. Member Firm Engagement at the Time of Referral (Recommendation 6)

What’s New: The Report recommends that when a matter is referred to Enforcement, the respondent firm will receive written notice identifying the referral, the assigned Enforcement staff, and reasonable detail regarding the nature of the Staff’s concerns and the potential violations at issue. In addition, firms would be afforded an opportunity to present their views on the merits, including through engagement with non-Enforcement subject-matter experts as warranted, before Enforcement finalizes its plan of investigations.

Practical Considerations: Shortly after the introductory meeting, firms and counsel may wish to consider whether to meet with the Staff or submit a white paper addressing the relevant factual and legal issues, including past or contemplated remedial efforts, to help frame the matter from the firm’s perspective. Where the matter implicates specialized market practice, trading, complex products, or technology issues, firms could identify potential subject-matter experts whose perspectives may inform FINRA’s assessment.

3. Information Requests and Rule 8210 Process (Recommendation 11)

What’s New: The Report recommends comprehensive reforms to FINRA’s information request practices, including centralized and structured tracking of all information requests (whether or not issued pursuant to Rule 8210) to prevent redundant requests; senior-level approval of requests; pre-issuance consultation with firms, as warranted, to discuss scope, timing, and burden; reasonable deadlines that reflect realistic assessment of the effort required; safeguards against inappropriate practices (such as contention interrogatories, requests conflicting with attorney-client privilege, or requests issued solely to demonstrate activity in dormant matters); and formalized procedures for addressing privilege claims and inadvertent production.

Practical Considerations: Firms may find it useful to prepare Rule 8210 response playbooks that include burden and scope escalation protocols, privilege review procedures, and internal tracking of all prior FINRA information requests. When pre-issuance outreach occurs, firms and counsel may decide to engage constructively to narrow scope, propose alternative productions, flag privilege issues, and negotiate realistic deadlines.

4. Forum to Challenge Rule 8210 Requests (Recommendation 12)

What’s New: The Report recommends that FINRA adopt a procedural mechanism allowing member firms to challenge Rule 8210 requests perceived to be inappropriate in scope or unreasonably burdensome. The mechanism would involve a neutral decision-maker (such as a hearing officer or a newly created FINRA role with relevant expertise), subject to appropriate safeguards, an exception for exigent circumstances, a requirement that firms first pursue good-faith escalation through the Enforcement chain of command, and anti-delay protections including administrative fees and potential sanctions for frivolous challenges.

Practical Considerations: The recommendation may increase the importance of documenting scope and burden concerns early in any dispute over Rule 8210 requests and preserving a record of good-faith efforts to resolve disputes informally through existing escalation channels. Once the challenge mechanism becomes available, firms and counsel may decide to establish internal criteria for determining when a formal challenge is warranted.

5. On-the-Record Testimony Practices (Recommendation 13)

What’s New: The Report recommends that FINRA publish enhanced policies and procedures governing on-the-record interviews (OTRs). Key elements include reserving OTRs for matters that have been referred to Enforcement or that otherwise warrant sworn testimony, limiting Staff attendance to no more than three Enforcement professionals, ensuring that witnesses in virtual OTRs can access and review document exhibits fairly, and making transcripts available for purchase or inspection immediately following testimony under a pro-release presumption (reserving “good cause” denials for specific instances of credible risk of unethical or inappropriate conduct).

Practical Considerations: If OTRs are reserved primarily for Enforcement matters and other higher-risk investigations, firms and counsel may view an OTR request as a more significant event and adjust strategy and preparation accordingly. Earlier access to transcripts may facilitate more timely assessments of testimony, potential exposure, and investigative strategy. Proposed changes to virtual OTR procedures will assist counsel in preparing witnesses.

6. Ongoing Remediation Dialogue During the Investigation (Recommendation 21)

What’s New: The Report recommends that Enforcement engage with respondent firms on remediation expectations and the Staff’s compliance expectations throughout the life cycle of a matter, not only at its resolution. This change would allow firms to understand the Staff’s views earlier and take appropriate corrective steps during an investigation.

Practical Considerations: This recommendation may create additional opportunities to use 90-day status discussions, which FINRA has already implemented, and other touchpoints to discuss compliance expectations, remediation efforts, and related issues. Counsel may decide to evaluate how remediation steps are presented to regulators, balancing the benefits of demonstrating a proactive response with the need to avoid creating unintended admissions.

7. Limitations Periods and Aging Matters (Recommendation 18)

What’s New: Historically, FINRA has not been constrained by a formal limitations period, and it has brought cases involving conduct occurring more than five years earlier. The Report recommends applying the applicable limitations period for violations of the federal securities laws even though FINRA is not legally bound by those periods. For charges based solely on FINRA rules, the Report recommends a baseline five-year limitations period, subject to exceptions for ongoing fraudulent conduct, concealment, and other tolling doctrines.

Practical Considerations: If adopted, these recommendations could substantially change how firms evaluate potential exposure, preserve evidence, assess tolling issues, and approach investigations involving older conduct. Firms seeking to avail themselves of a limitations defense may need to investigate matters promptly, including identifying key conduct dates, gathering relevant documents, developing the factual record, assessing potential tolling and concealment issues, and addressing remediation. In matters involving customer harm, timely remediation may become increasingly important, both to address the underlying issues and to reduce later disputes concerning the timing and duration of the conduct at issue.

8. Expedited Resolution of Technical Regulatory Matters (Recommendation 20)

What’s New: The Report recommends that after a matter has been referred to Enforcement, FINRA should develop streamlined frameworks and proportional relief for “technical” regulatory matters, defined as those not involving investor harm, where the issue has been remediated, or that reflect honest mistakes or good-faith compliance efforts. This could include abbreviated settlement procedures, reduced sanctions, or informal dispositions calibrated to the nature and severity of the violation.

Practical Considerations: As soon as practicable, firms and counsel may wish to evaluate whether a matter could qualify for streamlined resolution or proportional relief under the framework contemplated by the Report. Relevant considerations may include the absence of investor harm, evidence of good-faith compliance efforts, the nature and scope of any remediation, and whether the conduct reflects an isolated or technical violation rather than broader supervisory or compliance deficiencies.

9. Wells Process Improvements (Recommendation 7)

What’s New: The Report recommends that FINRA formalize, update, and publicly publish enhanced Wells procedures. Key elements include encouraging “reverse proffers” and “open jacket” practices at or around the Wells call; affording respondents access to all OTR transcripts and exhibits upon issuance of the Wells notice; maintaining a submission deadline of no fewer than 30 days absent extraordinary or exigent circumstances; ensuring senior Enforcement attendance at Wells meetings; providing an opportunity for post-Wells leadership meetings; and explaining to respondents, in appropriate detail, the rationale behind any final decision to proceed, the sanctions sought and their basis, remediation measures, and the extent to which cooperation credit was awarded or denied.

Practical Considerations: The enhanced Wells process may provide respondents with earlier and more meaningful opportunities to assess FINRA’s factual, legal, and sanctions-related theories before charging recommendations are finalized. The expanded use of reverse proffers, open-jacket reviews, and meetings with senior Enforcement leadership could enable firms and counsel to better understand FINRA’s theory of the case, test factual and legal assumptions, highlight exculpatory or mitigating information, address perceived evidentiary gaps, and present arguments regarding potential charges and sanctions. Earlier access to FINRA’s evidence and investigative record may affect how firms and counsel develop Wells presentations, evaluate legal and factual defenses, negotiate with Enforcement Staff, and position matters for potential resolution. In addition, as discussed below, firms may have additional opportunities to seek cooperation credit.

10. Settlement, Cooperation Credit, Sanctions, and Letters of Acceptance, Waiver, and Consent (AWCs) (Recommendations 22, 23(b), and 23(c))

What’s New: The Report recommends that FINRA update and publicly publish enhanced cooperation-credit guidance, recognizing that cooperation credit need not require “extraordinary” cooperation, and that credit not be foreclosed merely because a firm fulfilled its Rule 4530(b) self-reporting obligation or engaged in routine remediation. The Report further recommends that AWCs generally contain more fulsome and transparent explanations of any cooperation credit awarded and the reasons for that credit so that firms and individuals can better understand how cooperation is evaluated. Separately, the Report recommends that FINRA clarify how the National Adjudicatory Council (NAC) Sanction Guidelines apply to settled matters, require detailed explanations of consistency with or departures from guidelines, make clear that prior settlements should not be the principal justification for upward departures from published Sanction Guidelines ranges, track departures, and require senior approval for certain departures. Additionally, the Report recommends that AWCs include relevant mitigating factors and appropriate context and that FINRA consider making Mitigation Statements publicly available (like Corrective Action Statements) at a respondent’s election.

Practical Considerations: Firms may find it useful to document cooperation and remediation efforts throughout the life cycle of a matter, not only at the Wells stage, as the recommendation contemplates greater transparency regarding cooperation credit and mitigating factors in settled matters. Counsel may find value in preparing detailed sanctions analyses when negotiating settlements and in advocating for a balanced AWC that includes mitigating factors, remediation efforts, and cooperation to accurately reflect the circumstances of a resolved matter.

III. Broader Policy and Governance Changes

In addition to the operational process changes described above, the Report proposes significant structural and policy reforms. The following categories encompass the remaining recommendations.

1. Enforcement Principles and Metrics (Recommendation 1)

The Report recommends that FINRA adopt a formal policy, code, or canon of enforcement principles (potentially in the Enforcement Manual) acknowledging that (a) conventional enforcement statistics (case counts, fine amounts) are imperfect measures of program effectiveness; (b) focusing and tailoring a matter, reaching expeditious resolution, or declining to pursue a matter beyond a certain point can advance FINRA’s mission; and (c) alternatives to formal enforcement action may be appropriate when they could more quickly resolve compliance shortcomings and remedy investor harm.

2. Enhanced CEO, Board, and Senior Management Oversight (Recommendation 2)

The Report recommends that FINRA’s CEO be more actively involved—within appropriate guardrails—in specific matters and categories of matters before they are resolved, as part of FINRA’s internal processes. This includes advising on whether formal enforcement action is warranted, weighing in on categories of matters meeting criteria FINRA establishes, and offering input on appropriate settlement terms and relief. The FINRA Board of Governors has been briefed on the Report and will continue to monitor FINRA’s governance and oversight of the enforcement program.

3. Independent Review of Settlements and NAC/ODA Roles (Recommendation 3)

The Report recommends reevaluating the delegation of the NAC’s settlement-review authority to the Office of Disciplinary Affairs (ODA). This includes considering whether to restore the NAC as the principal reviewer of proposed settlements, determining which types of matters the delegation covers, the standard of review to be applied, whether the NAC’s role is approval or advisory, and the NAC’s membership composition.

4. Cross-Departmental Consultation and Subject-Matter Input (Recommendations 4 and 5)

The Report recommends creating a “Deputies Committee” of senior leaders that would meet regularly to identify, escalate, and assess issues requiring cross-departmental subject-matter expertise earlier in the enforcement life cycle. Additionally, the Report recommends more formalized, regular, and documented engagement by subject-matter experts outside Enforcement, including a structured process for liaisons from other departments to review AWCs or disciplinary complaints before they are finalized.

5. Enforcement Manual and Staff Training (Recommendations 8 and 24(b))

The Report recommends that FINRA revise and publicly publish an updated Enforcement Manual that provides greater transparency about the enforcement process, promotes consistency, incorporates accepted recommendations, and reflects input from senior FINRA leadership. The Report also recommends developing and administering training on industry developments, securities markets, member business models, and the enforcement process for Enforcement and other FINRA staff. FINRA’s CEO has indicated that publication of the Enforcement Manual is forthcoming.

6. Enforcement Workflows and Documentation (Recommendations 9 and 24(c))

The Report recommends that FINRA develop and publish workflow diagrams and step-by-step documentation explaining the internal life cycle of enforcement matters, including pre-referral and post-referral stages, transitions between departments, formal referrals, and reviews and escalations. The Report also recommends enhancing documentation practices throughout the enforcement life cycle to promote accountability and consistency.

7. Access to Disciplinary Materials and Precedent (Recommendation 10)

The Report recommends that FINRA provide enhanced accessibility and searchability of complaints, decisions, settlements, and other publicly available disciplinary materials in its Disciplinary Actions Online Database, including by making materials available on third-party legal research platforms commonly used by in-house compliance and legal departments and other securities practitioners.

8. Centralization and Coordination Across FINRA (Recommendation 15)

The Report recommends establishing a centralized function, staffed by senior professionals, that would monitor, track, and coordinate information requests and open matters across FINRA and serve as a centralized point of contact for member firms navigating multiple FINRA departments. These assigned professionals would serve as a single point of contact across FINRA departments, including by helping determine whether requested materials are already in FINRA’s possession from prior requests and whether a contemplated request is mismatched to the firm’s business lines or risk profile, subject to confidentiality, access, and information-security constraints.

9. Start-to-Finish Matter Tracking, Controls, and Accountability (Recommendations 17 and 24(d))

The Report recommends that FINRA enhance its internal tracking of enforcement matters by priority, complexity, subject area, applicable rule, source of referral, resolution type, and key milestones. This tracking would be transparent to management and, where appropriate, to respondents, to address aging or dormant matters and facilitate timely status updates. The Report also recommends evaluating and implementing controls to promote adherence to the Enforcement Manual and other policies, procedures, Regulatory Notices, and rules.

10. Avoiding Duplicative Enforcement (Recommendation 16)

The Report recommends that FINRA update its policies and practices to avoid duplicative enforcement where the SEC, the US Commodity Futures Trading Commission, the Financial Crimes Enforcement Network, the US Department of Justice, a state regulator, or another SRO has already taken action that sufficiently addresses the underlying conduct—unless FINRA’s action would be additive (e.g., addressing conduct not covered by the other regulator’s action or providing specific relief to FINRA-regulated persons or markets).

11. Resolution Frameworks and Collateral Consequences (Recommendations 23(a), 23(d), 23(e), and 23(f))

The Report recommends limiting companion or “tag-along” Rule 2010 charges where the underlying violation does not independently involve fraudulent or unethical conduct. The reviewers expressed concern that routine use of Rule 2010 in connection with technical rule violations may overstate the nature of the conduct and dilute the significance of Rule 2010 findings in matters involving genuinely unethical behavior. The Report also recommends expanding and updating the Minor Rule Violation Plan to cover additional rules and increase fine levels; discussing proposed Cautionary Action Letters with recipients in advance and affording a meaningful opportunity to provide input before issuance; and permitting FINRA’s Statutory Disqualification Group and NAC Statutory Disqualification Committee to consider draft Form MC-400A applications before settlements that may trigger statutory disqualification, thereby allowing firms to better assess potential membership consequences before finalizing such settlements.

12. Rulemaking, Periodic Review, and Technology (Recommendations 24(a) and 24(e))

The Report recommends that FINRA evaluate which accepted recommendations warrant codification through the formal rulemaking process, establish a regular process for periodic review of the enforcement program’s efficiency and effectiveness, and continue evaluating how to leverage advanced technology, including artificial intelligence, to assist in meeting its mission.

Conclusion

The Report represents one of the most comprehensive independent assessments of FINRA’s enforcement program to date. While FINRA will consider the recommendations individually and holistically—and has already implemented several enhancements—the Report provides meaningful insight into how FINRA leadership is evaluating enforcement priorities, processes, transparency, respondent engagement, and regulatory effectiveness.

Regardless of how many recommendations FINRA ultimately adopts, the Report may prove useful as a roadmap for potential reforms and also reflect themes likely to influence FINRA investigations and enforcement matters in the near term. Firms that evaluate their compliance programs, regulatory response protocols, and enforcement preparedness in light of those issues may be better positioned to engage effectively throughout the enforcement process.

__________

If you have any questions about this Legal Briefing, please feel free to contact Brian Rubin, any of the attorneys listed or the Eversheds Sutherland attorney with whom you regularly work.