On February 4, 2025, shareholder Bryce Cullinane attended SIFMA’s forum on FINRA’s 2025 regulatory programs, including enforcement priorities, in New York. The session focused upon FINRA’s 2025 Regulatory Oversight Report (released January 28, 2025), which highlights observations from across FINRA’s Member Supervision, Market Regulation, and Enforcement programs in the previous year. Member firms typically use the Report throughout the following year to refine their compliance programs. This annual event was well-attended by compliance personnel from all the major broker-dealers to gain insight into the topics and areas on which FINRA will be focused (for audits and for enforcement actions in the coming year).
The panelists included FINRA’s Head of Enforcement, who addressed the following priorities for 2025:
- Cybersecurity – Firms will be questioned on whether they knew, or could have known, of weakness in their programs, and how difficult it would have been to patch such weaknesses.
- FINRA Rule 3241 cases are still being pursued by FINRA Enforcement, with two notable cases from last year involving registered persons who designated themselves or their spouses as “friends or family” of customers, in order to serve as beneficiaries of their assets.
- Firm supervision of customer accounts being used for the purpose of participating in “investment clubs,” which ultimately result in classic pump-and-dump scams.
- Firm disclosures by firms that offer after-hours trading to their customers.
- Registered Index-Linked Annuities – A focus on whether firms are monitoring the recommendations of these products under Reg-BI, including concentration, liquidity, and broker compensation.
- An increased scrutiny of products purchased in brokerage accounts and quickly thereafter moved to advisory accounts.
- Ensuring that compliance departments are not glossing over classic issues such as excessive trading (i.e., not maintaining registered persons training for this important issue).
- AML supervision – ensuring that customers are not engaged in transactions in high-risk jurisdictions and that firms are testing their procedures for verifying customer information (i.e., that certain products or customers are not inadvertently excluded from compliance software).
- Off-channel communications – a focus on who (high level executives or entry level brokers) was sending off-channel communications, how long the communications were being sent and undetected by the firm, and how clear the firm was with the broker regarding its policy prohibiting such communications.
The above is not an exhaustive list, but are those key topics that FINRA’s Head of Enforcement discussed during this valuable session in New York.
Each of the above areas is one in which Keesal, Young & Logan has assisted clients, and can assist with in the coming year.
Keesal, Young & Logan encourages clients to review FINRA’s 2025 Regulatory Oversight Report.