Activity

The Financial Industry Regulatory Authority (FINRA) has been active in its enforcement efforts in 2025, with a focus on protecting investors and maintaining market integrity. Their “2025 Annual Regulatory Oversight Report,” published in January 2025, outlines key areas of risk and compliance that are informing their enforcement priorities.
Here are some of the key themes and examples of FINRA’s enforcement actions and priorities for 2025:
Key Enforcement Themes and Priorities for 2025:
* Regulation Best Interest (Reg BI) and Form CRS: FINRA continues to prioritize compliance with Reg BI, which requires broker-dealers to act in the best interest of retail customers. Enforcement actions often address failures related to the duty of care, conflicts of interest, disclosure obligations, and overall compliance with the rule. This includes recommendations of complex products like Registered Index-Linked Annuities (RILAs).
* Third-Party Risk Management: With firms increasingly relying on third-party vendors for various functions, FINRA is scrutinizing the risks associated with these relationships, including cybersecurity and data privacy. Firms are expected to have robust supervisory controls and contingency plans for vendor failures.
* Cybersecurity and Cyber-Enabled Fraud: Given the rise in sophisticated cyberattacks and investment fraud directly targeting investors, FINRA emphasizes the need for strong cybersecurity measures, fraud detection, and investor education. This includes monitoring for uncharacteristic customer behavior, educating personnel and customers about scams, and having response plans for suspicious activity.
* Extended Hours Trading: As trading increasingly occurs outside of regular market hours, FINRA is focusing on firms’ compliance with best execution and supervision requirements in this context, and ensuring proper customer disclosures for extended hours trading.
* Artificial Intelligence (AI): FINRA recognizes the potential of AI tools but also highlights the need for firms to manage associated risks, such as the leakage of sensitive customer and proprietary information. They are observing firms’ cautious approaches to implementing AI, particularly generative AI.
* Market Integrity: This includes addressing manipulative trading practices, such as spoofing, and ensuring accurate and timely trade reporting (e.g., to the Consolidated Audit Trail (CAT) and Real-time Transaction Reporting System (RTRS)).
* Anti-Money Laundering (AML) and Financial Crimes Prevention: FINRA continues to emphasize robust AML policies and procedures, including monitoring for suspicious transactions and enhancing customer identification programs.
* Protecting Seniors and Vulnerable Investors: This remains a critical area of focus, with enforcement actions often involving cases where seniors were harmed by unsuitable recommendations or fraudulent schemes.
Examples of Recent Enforcement Actions (May 2025):
* Goldman Sachs was censured and fined for alleged inaccurate CAT reporting, failing to accurately report a significant number of order events and having supervisory systems that were not reasonably designed.
* Firms have been censured and fined for failures related to unretained and unsupervised communications with customers about various investment matters.
* Actions have been taken against firms for failing to report municipal transactions and for inadequate supervisory systems related to reporting obligations.
* Individuals have faced suspensions and fines for engaging in outside business activities without proper notice or approval.
* Securities principals have been suspended and fined for Reg BI violations, specifically making recommendations without sufficient understanding of product features and risks, and making recommendations inconsistent with customer investment profiles.
* Former representatives have been barred for participating in private securities transactions without approval or for making misrepresentations to mortgage lenders.
FINRA’s enforcement activities aim to ensure compliance with its rules, deter misconduct, and protect investors. Firms are encouraged to review FINRA’s annual report and disciplinary actions to understand current areas of focus and strengthen their compliance programs accordingly.

Video courtesy of First Bank of Nigeria

Video courtesy of First Bank of Nigeria