Brokerage firms facing scrutiny over a potential compliance violation have long been able to help their cause by engaging with regulators throughout the process. Now Finra, the brokerage industry’s self-regulatory organization, is piloting a new self-reporting initiative that could bring Finra’s inquiries to an end sooner and potentially avoid penalties.
Leaders of Finra’s enforcement division described reforms to the organization’s processes at a recent conference in Washington, stressing the importance of volunteering information that could help regulators understand more about the firm’s operations, what might have gone wrong from a compliance perspective, and what the firm is doing to address the issue.
At the outset of an investigation, Finra is inviting firms, along with their outside counsel, to sit for an introductory meeting. That enables the regulator and the firm to compare notes and for the firm to proactively furnish information without waiting for the formal request from Finra staff. It also gives the firm an opportunity to outline remedial steps it has taken on its own to address any compliance deficiencies, which can be a major factor in how harsh a penalty the firm receives.
“We take that into account, of course, when determining the outcome of our cases,” said Bill Thompson, vice president and chief counsel at Finra’s enforcement division.
Further along in the investigative process, near the end of the fact-finding phase, Finra has been inviting firms in for what its calls an investigative findings meeting, when enforcement staff can share what they have learned and give the firm a chance to respond ahead of moving to “get everyone on the same page,” said Matt Minerva, also a vice president and chief counsel at the enforcement division.
“We want to eliminate surprises down the road,” he said. “If a firm makes enhancements or updates to its processes and procedures anywhere in the life cycle of the case…please tell us about it because we do want to take it into consideration.”
Pilot program
With the self-reporting program, launched in June 2025 but still in the pilot phase, Finra is asking firms that identify significant compliance failures to come forward and present the regulator with information about the issue, as they are required to do under Rule 4530(b). The program offers firms the chance to bring those issues to Finra’s attention without necessarily resulting in a formal enforcement investigation, though Finra doesn’t guarantee there won’t be one.
“The goal of the pilot is to empower firms, to give them space to undertake a process that they started by doing the self-report initially without needing to balance the concurrent Finra investigation where we’re asking questions that may be important to us but may not be the ones that are on the top of your list to address,” said Julie Glynn, a senior vice president at the enforcement division.
She said that the 30 or so cases in the pilot program so far have shown positive results, with faster resolutions that address the compliance issues without resulting in a formal enforcement action.
“Participation in this pilot does not preclude Finra from doing an investigation or asking additional questions, nor does it necessarily mean that we won’t bring a disciplinary action, but we think it kind of strengthens firm ownership and resolution of issues and expedites how matters are concluded,” Glynn said.