The 2024 FINRA Annual Regulatory Oversight Report serves as a crucial guidepost for firms navigating the evolving compliance and risk landscape. As regulatory scrutiny intensifies across financial markets, firms must ensure their compliance frameworks are robust, proactive, and adaptable to shifting priorities. This year’s report spotlights emerging risks, updates to long-standing regulations, and enhanced oversight in key areas. Below, we break down the most significant takeaways that financial professionals should prioritize in 2025.
1. Heightened Focus on Financial Crimes: Cybersecurity, AML, and Market Manipulation
Regulators are sharpening their oversight on financial crimes, with a particular emphasis on cybersecurity, anti-money laundering (AML) compliance, and manipulative trading practices. The report underscores FINRA’s commitment to enforcing stringent cybersecurity measures and ensuring firms are prepared to handle increasingly sophisticated cyber threats.
- Cybersecurity & Technology Management: Firms must strengthen defenses against ransomware, phishing, and insider threats. The SEC’s new cybersecurity disclosure rule requires firms to report material cyber incidents within four business days.
- Anti-Money Laundering (AML) & Fraud Prevention: FINRA is doubling down on AML compliance, urging firms to refine their suspicious activity detection processes. Increased attention is being given to new account fraud, account takeovers, and illicit trading through omnibus accounts.
- Market Manipulation Risks: The report emphasizes enhanced surveillance measures for spoofing, layering, and wash trading. FINRA is urging firms to implement real-time trade monitoring systems that can flag coordinated trading patterns across multiple accounts.
2. Regulatory Spotlight on Crypto Assets
For firms engaged in digital asset transactions, crypto regulatory oversight is ramping up. FINRA is scrutinizing broker-dealer compliance in this space, with particular attention on:
- Firms operating Alternative Trading Systems (ATS) for crypto assets.
- Custody risks associated with digital assets, following the SEC’s Special Purpose Broker-Dealer guidance.
- Compliance obligations for private placements involving crypto assets.
Expect continued regulatory developments as crypto market volatility and security concerns drive further rulemaking.
3. Strengthening Compliance in Firm Operations and Sales Practices
Ensuring operational integrity is paramount, with FINRA expanding its examination of outside business activities (OBAs), private securities transactions (PSTs), and recordkeeping practices.
- Off-Channel Communications Compliance: Firms must supervise and retain all business-related communications, even those conducted via text or encrypted messaging apps.
- Reg BI and Form CRS: Enforcement of Regulation Best Interest (Reg BI) compliance is tightening, particularly around how firms disclose conflicts of interest in private placements.
- Best Execution & Fixed Income Market Reforms: FINRA is prioritizing fair pricing in fixed-income markets, with a focus on advertised volume transparency and OTC quotation practices.
4. Liquidity & Credit Risk Management: Enhancing Resilience
The ongoing market uncertainty has led FINRA to stress liquidity risk management and credit risk exposure as critical compliance areas.
- Net Capital & Liquidity Stress Testing: Firms must enhance capital adequacy frameworks to withstand sudden market shocks.
- Portfolio Margin & Intraday Trading Risks: Increased scrutiny on firms offering leverage, particularly around portfolio margin and intraday risk controls.
What Firms Should Do Next
The 2024 FINRA Oversight Report is a clear signal that regulatory expectations are rising. Firms must take preemptive action to ensure compliance, particularly in cybersecurity, financial crime prevention, crypto oversight, and operational risk management.
Key Action Items:
- Review and update cybersecurity policies in line with new SEC disclosure rules.
- Enhance AML transaction monitoring to detect fraud, synthetic identity schemes, and illicit trading activity.
- Strengthen trade surveillance systems to monitor market manipulation tactics.
- Ensure compliance with Reg BI and customer disclosure obligations to mitigate regulatory enforcement risk.
- Assess liquidity and capital adequacy measures to maintain financial resilience in volatile markets.
Stay Compliant with FNEX
As a FINRA-member broker-dealer, FNEX provides industry-leading Compliance-as-a-Service (CaaS) solutions to investment banking teams, asset managers, and third-party fund distributors looking to elevate their operations with full regulatory support.
LEARN MORE ABOUT FNEX COMPLIANCE SERVICES
Our turnkey broker-dealer compliance services ensure firms remain compliant while focusing on deal-making, capital raising, and fund distribution. FNEX delivers the infrastructure, expertise, and regulatory oversight you need to operate with confidence in today’s evolving financial markets.
Reference
FINRA – 2024 FINRA Annual Regulatory Oversight Report
