On June 30, 2026, FINRA released an external review of its Enforcement Program prepared by Professor Paul R. Eckert of William & Mary Law School and former SEC Commissioner Troy A. Paredes.¹ The Report sets forth 24 recommendations addressing governance, due process, transparency, information requests, timeliness, and the resolution of Enforcement actions.  While the Report is forward-looking and it remains to be seen which recommendations FINRA will implement, it provides insights and opportunities that member firms and individuals in current or future Enforcement matters can use to advocate for more efficient investigations, lower penalties, and expedient resolutions.  In this alert, we summarize five of these insights and offer practical advice on using them in Enforcement matters.

1. FINRA’s Sanction Guidelines, Not Settlement Precedent, Should Anchor Penalty Negotiations

The Report recommends that FINRA “ensure that the following is appropriately clear” in its internal documents governing Enforcement Staff actions: “The NAC’s Sanction Guidelines apply to settled matters,” and “[p]rior settlements, while germane, should not be the principal justification for departures upward from published ranges.”² In fact, FINRA has confirmed that its updated internal procedures and forthcoming Enforcement Manual will explicitly state that the Sanction Guidelines apply to settled matters.³ This reference to the Sanction Guidelines propounded by FINRA’s National Adjudicatory Council (“NAC”) addresses a long-standing disconnect between Sanction Guidelines set forth by the NAC and actual sanctions imposed by Enforcement in settlements.

The NAC sets forth approved sanction ranges for specific rule violations, differentiating between small- and midsize- to large firms and detailing the factors that could weigh in favor of the lower or higher end of each range.  These Sanction Guidelines are updated regularly.  Hearing panels in litigated disciplinary proceedings typically hew closely to the Sanction Guidelines when imposing penalties.  The Sanction Guidelines are designed to provide flexibility and contemplate that “[b]ased on the facts and circumstances presented in each case, Adjudicators may impose sanctions that fall outside the ranges recommended.”⁴

However, this exception has proven to be the rule in Enforcement settlements.  Particularly in matters against mid- and large-sized firms, Enforcement may demand fines well above the high end of the NAC’s recommended range, sometimes by orders of magnitude.  Enforcement typically points to sanctions in other settled cases as the basis for its demand. The Report calls out this practice by Enforcement and reminds Enforcement that the Sanction Guidelines should be the primary framework on which settlement penalties should be based.  Practitioners can use this observation – and FINRA’s explicit acknowledgement that the Sanction Guidelines apply to settled matters – to remind Enforcement Staff of the importance of the Sanction Guidelines even where they differ from settlements that have become untethered from the NAC’s guidance.

The Report also recommends that FINRA update its guidance on cooperation credit, noting that cooperation should not be required to qualify as “extraordinary” to warrant credit, and firms should not be automatically precluded from credit merely because conduct was reported pursuant to FINRA Rule 4530(b) or because remediation is characterized as routine or expected.⁵ This is consistent with the Sanction Guidelines, which instruct adjudicators to consider “with respect to all violations” factors such as whether a firm provided substantial assistance to FINRA, acknowledged misconduct prior to detection by a regulator, and voluntarily employed subsequent corrective measures prior to detection by a regulator.⁶ However, in current practice FINRA member firms arguing that their cooperation, self-reporting and/or remedial efforts warrant a lower sanction often hear that meaningful credit is only warranted under specific circumstances, such as when firms hire an independent consultant as part of remediation.  The Report’s observations provide grounds for member firms with a record of self-reporting, remediation, internal reviews, and cooperation to press for consideration of those factors even where Enforcement Staff has historically been reluctant to award it.

2. A Limitations Period Could Fundamentally Change the Landscape for Long-Running Investigations

FINRA has long stood apart from other financial regulators in operating without a statute of limitations. The Report notes “concerns about the fairness of years-long delays before the initiation of an Enforcement action or disciplinary proceeding involving alleged noncompliance with the federal securities laws or SRO rules,” describing the concerns that arise when firms must defend against stale claims, including faded memories, lost records, and departed personnel.⁷ Although prior SEC and NAC authority has recognized that inordinate delay can render SRO proceedings “inherently unfair,” those authorities depend on individualized showings of prejudice that firms typically cannot fully develop until they are already well into a contested proceeding.⁸

The Report recommends that FINRA generally follow federal limitations periods where an alleged violation is tied to the federal securities laws, suggesting that a five-year period would be a reasonable starting point subject to traditional doctrines such as tolling and continuing violations.⁹ This recommendation has not yet been implemented, and FINRA may ultimately decide not to adopt a statute of limitations. Even so, the concerns articulated in the Report would provide additional support for any firm facing investigations of aged conduct where the fairness concerns described here are real and problematic.  Practitioners may cite the observations in the Report to argue that FINRA should proceed expeditiously and/or limit its disciplinary actions to conduct that occurred within a reasonable time period prior to the Enforcement action, such as the five-year period that would apply if the SEC, rather than FINRA, were bringing the case.

3. Relief for Improper or Overly Burdensome Rule 8210 Requests

The Report observes that “FINRA should adopt enhanced precautions to ensure that information requests by the Enforcement Department consistently avoid inappropriate practices” and enumerates several such practices, including:

• using Rule 8210 to serve contention interrogatories;
• requiring respondents to “state positions as to legal or factual defenses at an early stage in an investigation without the benefit of a developed factual record or meaningful opportunity to refresh memories of long-past events”; 
• mandating that a member firm conduct a counsel-led internal review as an alternative to Staff-led investigative efforts; 
• unreasonably intruding on attorney-client privilege and work-product protections; 
• issuing requests solely or primarily to demonstrate activity in otherwise dormant investigations; and 
• issuing requests after the Wells stage without a clear investigative purpose.¹⁰

These observations are likely grounded in concerns about Rule 8210 requests that seem intended to drive a specific outcome rather than fact-finding.  To provide member firms with some protection against the potential abuse of Rule 8210 by FINRA Staff, the Report recommends that FINRA “adopt a procedural mechanism that would permit member firms to challenge, subject to appropriate safeguards and procedural requirements and an exception for exigent circumstances, the appropriateness of such requests issued pursuant to Rule 8210 against a standard of review that FINRA establishes.”¹¹

Even prior to the implementation of any such forum, however, the Report provides support and credibility to firms that seek to object to inappropriate Rule 8210 requests.  In the absence of a formal venue for objecting to Rule 8210 requests, member firms today faced with improper use of Rule 8210 should consider escalating concerns to senior FINRA Staff.  Additionally, the proposed challenge mechanism is worth watching closely and, if adopted, could significantly change the way discovery in Enforcement matters operates in practice. 

4. Early Engagement Following a Referral to Enforcement 

The Report recommends that firms be afforded meaningful engagement opportunities when a matter is referred to Enforcement.  Specifically, it recommends that firms be informed in writing of the referral, the potential violations that prompted it and the Enforcement Staff assigned to the matter, and that firms have a meaningful opportunity, in a structured setting and at an appropriate level of seniority, to present their views on the merits of the referral.¹² This recommendation builds on FINRA’s recently implemented “kickoff” process, under which Enforcement meets with firms at referral to share initial areas of focus and hear the firm’s observations and concerns.¹³

Following a referral, firms should consider requesting an early meeting with Enforcement Staff to better understand their areas of focus and, where appropriate, present factual and legal arguments before the Staff has formed a view.  Early engagement offers firms the opportunity to shape Enforcement Staff’s understanding of the facts and applicable law, which may result in narrowing the scope of the investigation.

5. Expedited Resolution for More Technical Matters

The Report recommends that FINRA consider whether there are more streamlined frameworks and processes (along with appropriate relief) for the expedited resolution of certain matters such as technical matters involving no customer harm that have been remediated, or where there were good faith efforts to comply.¹⁴ This recommendation extends the logic of FINRA’s Rapid Remediation program into the post-referral context.¹⁵

Even if FINRA does not implement a more formal framework as recommended, member firms may point to the Report when faced with an investigation of technical issues where there is no customer harm, the technical violation has been remediated, and there are no indicia of bad faith.  The Report’s observations would support the position that extended investigations (such as those requiring on-the-record testimony, onerous narrative responses, or extensive internal reviews) would be disproportionate to the impact of the violation.  Where a matter referred to Enforcement involves discrete technical, reporting, or operational issues and firms are nonetheless faced with extensive and onerous Rule 8210 requests, firms may argue that an extended and burdensome investigation is an inappropriate exercise that serves only to increase costs and delay resolution.

Looking Ahead

The Report does not, standing alone, change FINRA’s rules or enforcement practices.  It does, however, offer observations about whether certain current practices are supportable or appropriate.  Firms with ongoing Enforcement matters should consider whether the principles underlying these recommendations can be incorporated into current discussions with Enforcement Staff, and firms with new referrals may find opportunities in the Report to shape the direction of an investigation earlier and more effectively than in the past.