Broker-Dealers

FINRA-registered broker-dealers operate under the most comprehensive supervisory compliance framework in the U.S. securities industry. Membership in FINRA brings with it an obligation to comply with FINRA's rulebook — more than 200 rules covering supervision, sales practices, financial responsibility, books and records, AML, and operational obligations. The FINRA examination cycle evaluates not just whether written procedures exist but whether the supervisory system functions as designed. Examiners increasingly focus on the gap between policy and practice — a gap that creates greater regulatory exposure than the absence of policy at all.

The implementation of Regulation Best Interest in 2020 fundamentally changed the standard of conduct for broker-dealers making recommendations to retail customers. The care obligation requires documented analysis of costs and alternatives; the conflict of interest obligation requires identification, disclosure, and mitigation of conflicts embedded in compensation arrangements, product shelf construction, and revenue sharing. Form CRS added a disclosure obligation that has been the subject of significant SEC examination attention since its implementation. AML obligations — particularly beneficial ownership under the FinCEN CDD rule — continue to generate FINRA examination findings across firm types and sizes.