The broker-dealer regulatory landscape continued to evolve rapidly throughout the summer of 2026. Key developments included FINRA's enforcement modernization efforts, implementation of new intraday margin requirements, capital formation reforms, evolving communications and best execution proposals, and continued growth in dual registration and industry consolidation trends.
Regulatory Updates
September 10, 2026
Broker-Dealer Regulatory Pulse–Fall 2026
FINRA 2026 Industry Snapshot: Growth Amid Concentration
On June 1, 2026, FINRA published its 2026 Industry Snapshot.
Key data points include:
- The total number of registered representatives reached 639,723 at year-end 2025 (up 5% since 2021), with 40,000–45,000 newly registered participants entering the industry annually for the fourth consecutive year.
- For the first time, dual registrants outnumbered broker-dealer-only representatives. More than half of all FINRA-registered individuals (331,802) maintain registrations as both broker-dealer representatives and independent adviser representatives. Broker-dealer-only representatives decreased to 307,921 individuals.
- While the total number of registered professionals grew, the overall number of FINRA member firms declined because of ongoing industry consolidation and concentration.
- Record stock trading: The average daily dollar volume of exchange-listed (National Market System [NMS]) stocks hit a record $828 billion, which is an increase of over 33% compared to 2022 levels. Trading outside regular market hours now accounts for 20% of total U.S. stock trading activity.
- Surging options volumes: Average daily listed options transactions surged to 8.4 million, representing a 50% jump from the 5.6 million daily transactions recorded in 2023. Contracts expiring on the same day they are traded (zero days to expiration) account for roughly 30% of all options.
FINRA’s ongoing rule modernization push dominated spring and summer of 2026.
- Enforcement Program Overhaul: On June 30, 2026, FINRA released a landmark report titled “Recommendations based on a Review of the Policies, Procedures, Processes and Practices of FINRA’s Enforcement Program,” authored by Professor Paul R. Eckert and former SEC Commissioner Troy A. Paredes. This report, commissioned as part of the FINRA Forward initiative, issued 24 recommendations across multiple categories. FINRA CEO Robert W. Cook accompanied the report’s release with a letter signaling a commitment to implement these reforms. This report represents the most significant potential shift in FINRA enforcement practices in over a decade.
Key Recommendations
- Statute of Limitations: Adopt defined limitations periods that track federal standards instead of relying on vague delays.
- Cooperation Credit: Clarify guidelines on how firms receive credit for self-reporting, remediation and cooperating.
- Process and Scope: Offer more touchpoints for member firms to challenge the scope of document requests and discuss preliminary findings with FINRA staff.
- Testimony Alternatives: Explore alternatives to formal on-the-record testimony in select situations.
FINRA-Registered Representatives
Individuals must be registered with FINRA to conduct securities business with the investing public (FINRA-registered representative). To become registered, securities professionals are required to pass qualification exams to demonstrate competence in their particular securities activities. A FINRA-registered representative’s duties may include supervision, sales of securities or training of persons associated with the member firms.
- Dual registration is now the predominant model: More than half of FINRA-registered representatives (331,802) hold both broker-dealer and investment adviser registrations.
- The number of FINRA member firms declined to 3,184 amid ongoing consolidation and concentration; small firms accounted for most of the attrition.
FINRA-Registered Firms
- Average daily dollar volume in exchange-listed NMS stocks reached a record $828 billion in 2025, more than one-third higher than in 2022; extended-hours trading represents roughly one-fifth of activity, up from a low-double-digit share only a few years earlier. Listed options average daily volume continued its multiyear climb, as average daily transactions count reached 8.4 million contracts in 2025, a 50% increase from 5.6 million in 2023. Contracts expiring the same day (zero days to expiration) accounted for about 30% of options activity, roughly double their 2022 share.
These structural trends reinforce examination focus on dual-registrant supervision, Regulation Best Interest (Reg BI)/Form CRS consistency, trade reporting obligations and compliance, and the operational resilience of smaller firms.
FINRA Enhances Enforcement Program
FINRA announced a series of enhancements to its Enforcement Program as part of the broader FINRA Forward initiative. The changes are intended to increase transparency, improve efficiency and provide firms with greater opportunities to engage with FINRA during the enforcement process.
Key enhancements include:
- Early Engagement: There will be introductory meetings for firms when matters are referred to the Enforcement Program.
- Specialized Expertise: Complex matters, including anti–money laundering and market-related issues, will be assigned to staff with specialized subject-matter expertise.
- Rule 4530(b) Pilot Program: In certain cases, firms that self-report violations may be permitted to complete internal reviews and remediation before FINRA opens a formal investigation.
- Additional Opportunities to be Heard: There will be greater dialogue with firms before certain enforcement actions and information requests are issued, including:
- Status updates at least every 90 days
- An end-of-investigation meeting to preview findings before the Wells process
FINRA also signaled additional reforms, including greater transparency of enforcement procedures and guidance on cooperation and remediation credit.
High-Risk Structured Products Sweep
In May 2026, FINRA announced a targeted examination sweep focusing on member firm supervision and sales practices concerning higher-risk structured products. The inquiry specifically targets non-principal protected “worst-of” structured notes to evaluate compliance with Reg BI.
Core Focus of the Sweep
- Concentration Risks: examining if firms allow customers to hold dangerous concentrations of high-risk, complex notes
- Worst-of Features: assessing notes tied to multiple reference assets where returns depend entirely on the worst-performing underlying asset
- Lack of Principal Protection: reviewing sales practices where investor principal is fully exposed to downside market risk
Key Areas Examined in Sweep Letters
- Written Supervisory Procedures (WSPs): evaluating internal rules for complex products
- Supervisory Alerts: checking automated triggers used to flag excessive customer concentration or suitability issues
- Representative Compensation: reviewing how brokers are paid and incentivized to sell these specialized instruments
- Review Period: covering transactions and oversight data spanning from January 1, 2022, through December 31, 2025
Intraday Margin Standards Replace Day-Trading Rules
One of the most significant operational changes of the period is the overhaul of FINRA Rule 4210, essentially retiring the rule that shaped active trading for a quarter century. Effective June 4, 2026 (with a phase-in period through October 20, 2027, for firms needing additional time), FINRA eliminated the pattern day trader framework, the related day-trade counting method and the $25,000 minimum equity requirement that came with it.
In their place, the minimum margin requirement for active traders reverts to $2,000, and firms must now watch each margin account’s actual exposure throughout the trading day and determine whether a customer margin account incurs an “intraday margin deficit” on any day with an intraday-margin-level-reducing transaction. Firms may use real-time monitoring that blocks deficit-creating trades or end-of-day calculations followed by prompt margin calls. Repeated failures to satisfy deficits can result in account restrictions of up to 90 days.
Regulatory Notice 26-10 (April 20, 2026) announced the change. Regulatory Notice 26-11 (May 19, 2026) provided updated interpretations of Rule 4210 and deleted obsolete day-trading interpretations. Firms should update WSPs, margin systems, customer communications and training accordingly. The shift moves the focus from trade counts to real-time or near-real-time risk measurement, a more flexible framework for customers, but one that requires higher surveillance efforts from firms.
SEC Daily Reserve Computation (Effective Date: June 30)
The SEC requires large carrying and clearing broker-dealers with average total credits of $500 million or more to perform daily customer and proprietary account of broker-dealers (PAB) reserve computations and to make required lockup deposits daily rather than weekly. This mandate took effect with a compliance deadline of June 30, 2026.
Key Requirements and Thresholds
- Scope: applies to carrying/clearing broker-dealers meeting or exceeding the $500 million average total credit threshold (calculated across customer and PAB reserve formulas)
- Calculation Frequency: must compute net cash owed to customers and other broker-dealers every business day
- Capital Efficiency Incentive: permits firms performing daily reserve computations (required or elective) to reduce customer-related receivable/debit item charges from 3% to 2% in the formula
Board approved four rule proposals advancing FINRA Forward Initiatives
Supervision Focus
FINRA continues advancing multiple modernization initiatives under the FINRA Forward program. In the supervision area, the Board approved two key proposals in June 2026:
- Permanent Remote Inspections: The proposal is focused on making the Remote Inspections Pilot Program permanent (before its expiration in June 2027), allowing eligible firms to continue risk-based remote inspections of offices and locations. The move is backed by data from FINRA’s Pilot Program. Roughly 970 firms (about a third of FINRA’s members, covering some 86% of registered representatives) participated in the pilot, prompting FINRA’s proposal to make the program permanent.
- Modernizing Home Office Supervision: This companion proposal would update requirements for non-branch locations and residential supervisory locations (RSLs), including extending the presumptive inspection cycle for non-branch locations, simplifying treatment of different types of residences and modifying certain supervisory ineligibility criteria for RSLs.
These changes, informed by Regulatory Notice 25-07 feedback and pilot data, aim to better align supervision with modern hybrid/remote workplaces while maintaining investor protection. Both proposals are proceeding toward SEC filing.
Continuing Education
The Board also approved a proposal to update the regulatory element of FINRA’s continuing education programs. The changes aim to reduce the continuing education workload for individuals holding multiple registrations, help firms develop training programs more efficiently, provide greater timing flexibility for meeting continuing education deadlines and introduce a new voluntary pilot for continuing education delivery to senior leaders. The proposal responds to feedback received in Regulatory Notice 25-07 and is proceeding toward SEC filing.
Capital Formation: Rules 5110 and 5123 Amendments Approved
On July 24, 2026, the SEC approved FINRA’s amendments to Rule 5110 (Corporate Financing Rule Underwriting Terms and Arrangements) and Rule 5123 (Private Placements of Securities). Both approved changes meet FINRA’s goal of easing the cost and administrative burden of capital-raising without reducing investor protection.
Rule 5110 changes clarify valuation methods for securities acquisitions treated as underwriting compensation and expand certain exclusions, including debt-for-equity exchanges, certain capital investments in direct participation programs and treatment of non-convertible preferred securities more like non-convertible debt in specified contexts.
Rule 5123 changes expand the categories of investor offerings exempt from FINRA’s 15-day filing requirement and further broaden exemptions to those consistent with SEC treatment of certain family offices and entities with more than $5 million in assets under management.
FINRA has indicated it will announce effective dates in a forthcoming regulatory notice. Firms active in underwriting, private placements or capital-raising should prepare to update compensation analysis, filing processes and related WSPs.
Communications with the Public: Modernization Proposal (RN 26-14)
On July 9, 2026, FINRA issued Regulatory Notice 26-14 requesting comment on proposed amendments to Rule 2210 focused on retail communications. The proposal would move from a largely prescriptive principal pre-use approval model toward risk-based supervisory standards, streamline certain filing requirements, and address evolving practices and technologies (including AI-generated content). Comments are due September 11, 2026.
This continues the trajectory begun with earlier proposals on performance projections and targeted returns. Firms should evaluate current principal-review workflows, AI-use policies and surveillance for communications in anticipation of eventual adoption.
Best Execution Guidance Under Review (RN 26-15)
On July 24, 2026, FINRA published Regulatory Notice 26-15 seeking industry input on modernizing best execution guidance under Rule 5310. The request responds in part to potential market-structure changes (including the SEC’s proposal to rescind certain Regulation NMS provisions) and solicits views on institutional versus retail orders, listed options, extended-hours trading, emerging technologies (including generative AI and tokenization) and related topics. Comments are due September 25, 2026.
Firms should consider submitting comments and begin internal reviews of order-routing policies, documentation of best execution analyses and technology-driven routing decisions.
Other Notable Developments
- Personal Services Entities Regulatory Notice 26-12: This notice provided guidance on the application of FINRA rules to arrangements structured under the November 2025 SEC staff no-action letter permitting certain registered-representative-owned personal services entities to receive transaction-based compensation under specified conditions.
- Outside Activities Proposed Rule 3290: FINRA’s proposal would consolidate Rules 3270 and 3280 into a single Rule 3290 focused on higher-risk, investment-related outside activities. It narrows the scope (excluding many low-risk personal activities), treats most unaffiliated investment adviser activity as requiring only notice and assessment rather than full supervision, and adds targeted carve-outs (including certain personal real estate). The proposal (SR-FINRA-2026-001) remains pending after the SEC instituted proceedings in May 2026. Firms should monitor and begin reviewing current processes.
- AI-Enabled Fraud and Proposed Rule 2166 Proposed Rule 2166: FINRA’s August 2026 rule filing would adopt proposed Rule 2166, creating an optional “speed bump” that would permit firms to temporarily delay a customer transaction or disbursement for up to 10 business days when there is reasonable belief of fraud. The proposal is intended to address increasingly sophisticated scams targeting customers of all ages, including schemes involving AI that can make impersonation, social engineering and other fraud harder for firms and investors to identify. Firms should evaluate fraud detection, customer verification, escalation, training and trusted-contact procedures as regulators continue to focus on AI-enabled and other evolving fraud threats.
- Senior Investor and Fraud Protection Regulatory Notice 26-02: FINRA is advancing proposed amendments to strengthen tools against financial exploitation and fraud. The amendments would update Rule 4512 to increase trusted-contact (or “emergency contact”) adoption and flexibility and to significantly extend the maximum temporary hold period under Rule 2165 from 55 to 145 business days for suspected exploitation of seniors and other specified adults.
- Trade Reporting and Compliance Engine (TRACE) and Related Reporting SEC Order Release No. 34-105991: On July 24, 2026, the SEC approved FINRA’s proposal to expand the existing nonmember affiliate–principal transaction indicator in TRACE to also cover certain principal transactions between affiliated FINRA member firms. The indicator (to be renamed the Affiliate–Principal Transaction Indicator) applies when affiliated members trade as principal in the same TRACE-eligible security, on the same day and at the same price as a transaction with an unaffiliated counterparty.
These inter-affiliate trades, which typically add no new pricing information, will be suppressed from public dissemination while remaining available for regulatory purposes, improving the quality of publicly disseminated TRACE data. FINRA will announce the effective date in a regulatory notice (expected no earlier than 12 months after approval, with possible earlier voluntary use).
Regulation S-P: Smaller-Entity Deadline Has Passed
The compliance date for smaller entities under the 2024 amendments to Regulation S-P was June 3, 2026. Larger entities were already subject to the requirements as of December 3, 2025.
Covered institutions must maintain a written incident response program reasonably designed to detect, respond to and recover from unauthorized access to, or use of, customer information, and they must notify affected individuals whose sensitive customer information was, or is reasonably likely to have been, compromised. Service-provider oversight (including contractual notice obligations, typically within 72 hours) and related recordkeeping remain critical.
FINRA continues to treat cybersecurity and data protection as top priorities. Firms that treated the June deadline as a soft target should confirm that incident response plans, vendor contracts, notification playbooks and testing are fully operational and documented.
Key Action Items for Broker-Dealers
Priority | Action | Status / Timing |
|---|---|---|
Intraday Margin (Rule 4210) | Update systems, WSPs, monitoring (real-time or EOD), customer disclosures and training; manage phase-in if needed | Effective June 4, 2026 (phase-in to October 20, 2027) |
Regulation S-P (smaller entities) | Confirm written incident response program, customer notification procedures, vendor contracts (72-hour notice) and testing are operational | Compliance date June 3, 2026 |
Capital Formation (Rules 5110/5123) | Review compensation analysis, exclusions and private-placement exemptions; prepare for effective date announcement | SEC approved July 24, 2026; effective date TBD |
Communications (RN 26-14) | Evaluate principal-review processes, risk-based supervision frameworks and AI-related controls; consider comment letter | Comments due September 11, 2026 |
Best Execution (RN 26-15) | Review order-routing policies, documentation and technology impacts; consider comment letter | Comments due September 25, 2026 |
FINRA Forward/OBA/Senior Protection | Monitor Rule 3290, senior investor proposals and supervision modernization; update WSPs as rules finalize | Ongoing/Q3–Q4 2026 expected activity |
The common thread across FINRA’s regulatory developments is shifting from static, checkbox compliance toward real-time, risk-based supervision. Broker-dealers that treat each change as a discrete compliance project rather than interconnected supervisory and operational updates risk falling behind examination expectations. Kroll’s Financial Services Compliance and Regulation team helps firms stay ahead by assisting with gap assessments, WSP updates, technology and process implementation, exam preparation, and targeted reviews across margin regulation compliance, cybersecurity/Reg S-P, communications, best execution and dual-registrant programs.
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