Insights: FINRA and SEC Enforcement Trends

By Jessica Hamby

Corner of a colorful modern building (seen in Munich, Germany)

This blog is part of a continuing series on regulatory and compliance issues discussed at FINRA’s 2023 Annual Conference. During a session at the conference the SEC’s Head of Enforcement and FINRA’s Enforcement Director discussed the top areas of enforcement focus for the upcoming year.

The SEC’s Areas of Enforcement Focus include:

  • Off-Chanel Communications. The recent large fines in this area are meant to have a deterrent effect. The SEC found that smaller fines from past cases were not effective enough to bring attention to this problem. Firms that self-report and begin remediation can expect lower fines.
  • Cybersecurity
  • Reg BI. This is also an area of review for the examinations team. FINRA suggests that firms review the SEC’s Reg BI Guidance and have tailored (not check-the-box) Written Supervisory Procedures (WSPs) and training.

FINRA’s Areas of Enforcement Focus include:

  • Best Execution
  • Reg BI. More cases will be coming soon around Care and Disclosure Obligation violations and Form CRS problems. There are still firms that have not adopted policies around Reg BI and taken steps to ensure compliance.


The SEC plans to do more sweeps in the future. The Commission has found sweeps to be effective because findings send a bigger message when they are grouped for multiple firms. The SEC has also found that if a risk is discovered at one firm it is likely at others as well. Some recent SEC sweeps have included Off-Channel Communications, Form CRS, and the 12b-1 Fee Initiative sweep.

FINRA sweeps are announced publicly, and preliminary findings are now released so that firms can utilize the information to review and remediate the issue, if necessary. FINRA pointed out that not all sweeps will end up in enforcement. FINRA Acceptance, Waiver, and Consent (AWC) announcements are also now more transparent and include more facts of the investigation so that firms can utilize this information.

Credit for Cooperation

The SEC and FINRA agree that firms will get credit for cooperation during investigations, which can lead to quicker resolution times and smaller fines.

The level of cooperation reflects the firm’s culture of compliance and is taken into consideration. Regulators are more likely to consider valid arguments when firms and counsel do not argue with every single point. The SEC noted that Wells Notice meetings are not the same as in past years. Not every recipient of a Wells letter will receive a meeting with the SEC Director or Deputy Director. The SEC also indicated that firms do not have to wait until the Wells meeting point in the investigation to let the SEC know where they believe they are off track or working with incorrect information.

Future Issues

The panelists ended the session with a preview of future regulatory focus areas. These include cryptocurrency, private funds, and issues with dually registered representatives and firms such as double dipping.

Oyster Consulting’s experts stay current with regulatory and compliance issues and are ready to help you navigate the challenges that your firm faces. Our consultants have regulatory and compliance experience to effectively conduct 3120 Reviews, off-channel communications, Reg BI and Best Execution, as well as help with other regulatory hot button issues. When your firm is ready to work with a compliance leader to design, implement and test programs that works for employees, clients, business goals and regulators, call Oyster Consulting.

About The Author
Photo of Jessica Hamby

Jessica Hamby

Jessica Hamby is a senior executive with expertise in Investment Advisor Business Development and has experience providing Compliance, Operations and Project Management support.