FINRA Rules
FINRA rules govern US broker-dealers and their representatives, covering supervision, recordkeeping, communications, suitability, and anti-money-laundering. FINRA enforces them with fines, restitution, suspensions, and expulsion, with recent emphasis on communications retention.
What FINRA Rules Are and Why They Exist
The Financial Industry Regulatory Authority (FINRA) is a US self-regulatory organization that oversees broker-dealers and their registered representatives under the supervision of the Securities and Exchange Commission. FINRA was formed in 2007 from the consolidation of NASD and parts of the NYSE's regulatory functions. Its rulebook governs how member firms conduct business, supervise their staff, communicate with the public, and protect investors.
FINRA rules exist to maintain fair, honest markets and to protect investors from misconduct by the firms and individuals that sell securities and provide investment advice.
Who It Applies To
FINRA rules apply to broker-dealer firms that are FINRA members and to their associated persons, including registered representatives and principals. Virtually every firm that buys or sells securities for the public in the United States must be a FINRA member. The rules do not directly govern investment advisers regulated solely under the Investment Advisers Act, though many firms are dually registered.
Key Requirements
- Supervision: firms must establish and maintain a supervisory system and written procedures reasonably designed to achieve compliance.
- Books and records: firms must create and retain extensive records, often for years, in non-rewritable formats for certain data.
- Communications with the public: advertising and correspondence must be fair, balanced, and retained, including electronic and social-media communications.
- Suitability and Regulation Best Interest: recommendations must serve the customer's interest.
- Anti-money-laundering programs and increasingly, cybersecurity safeguards, are required.
Penalties for Non-Compliance
FINRA can impose fines, order restitution to harmed customers, suspend or bar individuals, and expel firms from membership. Disciplinary actions are published, creating reputational consequences. Recordkeeping and communications-retention failures, including off-channel messaging on personal devices, have produced especially large recent fines across the industry.
How to Comply
- Build a documented supervisory system with written supervisory procedures mapped to applicable rules.
- Capture and retain all business communications, including electronic messaging, in compliant archives.
- Implement suitability and best-interest controls in the advice and sales process.
- Maintain an anti-money-laundering program and reasonable cybersecurity controls.
- Conduct regular internal reviews and promptly remediate findings.
For technology teams, the dominant challenges are reliable, immutable recordkeeping and complete capture of modern communication channels.
Off-Channel Communications and Recordkeeping
The most prominent recent FINRA and SEC enforcement theme has been "off-channel" communications: employees conducting business over personal messaging apps that the firm could not capture or retain. This exposed gaps in books-and-records compliance and produced very large industry-wide penalties. The lesson for technology and compliance teams is that recordkeeping must cover the channels people actually use, not just sanctioned email. Practical responses include providing compliant, archived messaging tools, technical controls that discourage unsanctioned channels, and clear policy with monitoring. Reliable, immutable capture and retention of all business communications is now a core operational requirement rather than a peripheral concern. Firms that proactively supply sanctioned, archived collaboration tools and monitor for unsanctioned use tend to avoid the costly enforcement that has followed widespread off-channel communication across the industry.