On April 14, 2025, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 25-07, requesting comment on whether and how its rules, guidance, and processes governing the organization and supervision of member firm workplaces should be modernized to reflect significant shifts in industry operations. The comment deadline has been extended to July 14, 2025.
Background
FINRA's current framework—largely built around physical branch offices, in-person inspections, and paper-based filings—reflects a regulatory structure designed for a pre-digital, centralized work environment. Today's broker-dealer landscape is increasingly defined by distributed teams, AI-driven tools, cloud-based platforms, and investor expectations of real-time, digital-first interactions. The COVID-19 pandemic accelerated the shift toward remote and hybrid work, prompting FINRA to pilot new programs, including remote inspections and residential supervisory locations.
Notice 25-07 marks the beginning of a broader initiative to modernize FINRA's regulatory architecture, with the workplace model as the first area under review.
Key Areas Under Review
1. Office Definitions and Supervision
FINRA is re-evaluating the continued utility of the "branch
office" and "office of supervisory jurisdiction"
(OSJ) designations under Rule 3110. Among the considerations:
whether private residences or virtual offices should be permanently
recognized as compliant supervisory locations and whether remote
inspections can be formalized beyond the pilot program.
2. Registration Processes and Information
Requirements
The Notice questions whether Forms BD, BR, U4, and U5 (many of
which fall under SEC oversight) continue to capture relevant data
for modern workforce structures. FINRA seeks input on how to better
reflect dynamic employment arrangements, evolving role definitions,
and decentralized supervision.
3. Qualification and Continuing Education
(CE)
Recent changes to CE delivery, including the Maintaining
Qualifications Program (MQP), have embraced digital formats. FINRA
is exploring whether additional modernization—such as
pre-hire exam authorization or tailored CE based on role-specific
risks—would enhance flexibility while preserving competency
standards.
4. Customer Communications and Electronic
Delivery
The Notice invites comments on whether current SEC and FINRA
electronic delivery guidance adequately addresses investor
expectations and technology capabilities, particularly with regard
to negative consent letters and delivery under the E-SIGN Act.
FINRA is also assessing potential risks for digitally disadvantaged
investors.
5. Recordkeeping and Digital
Communications
FINRA seeks clarity on how to apply Rule 17a-4(b)(4)'s
undefined "business as such" standard in the context of
AI-generated content, ephemeral messaging, dynamic websites, and
chatbot interactions. Comments are requested on whether current
retention requirements and supervisory obligations appropriately
reflect modern communications technologies.
6. Compensation Structures
The treatment of continuing commissions and personal services
entities (PSEs) under Rule 2040 remains a challenge. FINRA is
exploring whether adjustments could allow for greater flexibility
in accommodating retirements, unforeseen incapacity, or
non-traditional business structures—while ensuring
supervisory integrity and compliance with SEC "broker"
registration principles.
7. Fraud Mitigation Tools
Given the rise in technology-enabled fraud, particularly targeting
seniors and vulnerable investors, FINRA is examining whether
additional tools, rule changes, or data-sharing mechanisms could
help member firms detect and prevent exploitation more
effectively.
8. FINRA Systems and Member Compliance
Support
Finally, the Notice considers whether platforms such as FinPro,
FLEX, and the Central Registration Depository (CRD) can be enhanced
to streamline compliance workflows and reduce administrative
burdens.
Takeaways
Regulatory Notice 25-07 signals FINRA's recognition that legacy structures must evolve to meet the demands of a digitized, mobile, and investor-centric environment. The modernization initiative represents a critical opportunity for member firms, technology providers, and industry stakeholders to shape a regulatory framework that better aligns with how today's broker-dealers operate—without compromising investor protection.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
