FINRA remains under pressure

After a year when it fended off questions about its legitimacy raised by a lawsuit by broker-dealer, FINRA started 2026 in the hot seat before Congress.

At hearings in March, some lawmakers questioned whether the self-regulatory organization, which acts at the behest of the Securities and Exchange Commission, even has a right to exist.

Meanwhile, as it remains under attack in the highly anti-regulatory environment in Washington, FINRA is also working to have a friendlier relationship with the securities industry.

For example, recent changes make the enforcement process a little easier for broker-dealers.

Plus, FINRA recently said it was giving a rebate of $100 million to the broker-dealers it oversees, dismissing howls from the plaintiff’s bar that such money should go to investors who won arbitration awards against firms but never received a dollar in payment.

FINRA’s current dilemma is due, in part, to its role as a regulator during a Republican administration that staunchly believes in cutting regulations and rules, many of which are costly to implement.

The Trump administration’s recent push to allow advisors to sell more alternative investments in retirement plans will only put more pressure on regulators.

“I don’t think FINRA is being picked on, but the organization is being looked at to see its effectiveness versus its cost,” says Sander Ressler, managing director of Essential Edge Compliance Outsourcing Services. “Lawmakers are concerned that a membership organization that regulates the industry will have buy-in.”

“The biggest firms contribute the most cash,” he notes. “Will FINRA regulate those firms as tough as smaller firms? It’s a legitimate concern.”

“Congress is looking to reduce regulation, and as long as there is a Republican majority, it will continue to seek a reason to cut regulations for the securities industry,” Ressler says. “That also means tarnishing FINRA in public and questioning its constitutional authority.”

FINRA right now is no darling of some in Congress. On March 6, the Capital Markets Subcommittee took its time criticizing the self-regulatory organization in a hearing devoted to SROs.

“Today, FINRA staff, not industry members, writes binding rules, investigates people, brings enforcement cases, holds hearings, issues large fines, and can permanently end someone’s career,” says Republican Congresswoman Lisa McClain of Michigan.

“Yet, FINRA is not subject to the same transparency laws as federal agencies,” McClain says. “Its meetings are not fully open. Its records are not fully public. Now, if an organization exercises government-level power, it should have government-level accountability.”

“FINRA exercises regulatory authority over thousands of firms, yet it is not subject to the Administrative Procedures Act, FOIA, or direct congressional appropriations,” says Republican Congressman Warren Davidson of Ohio. “So members of this committee have had similar concerns about the structure of the Federal Reserve, for example.”

When asked about the Congressional hearing and such comments, a FINRA spokesperson replied: “As a self-regulatory organization, FINRA protects investors and safeguards market integrity at zero cost to the American taxpayer.”

FINRA has faced criticism from the securities industry it regulates ever since it was formed in 2007 by the merging of NASD and NYSE Regulation, Enforcement, and Arbitration.

At the end of 2024, FINRA oversaw and regulated 3,249 firms and 634,508 registered reps, or financial advisors. Although it is not a governmental agency, it operates under the aegis of the SEC. It charges broker-dealers fees, which make up its budget.

Once Donald Trump was re-elected president in 2024, FINRA staff was likely preparing to face such public criticism. After all, Project 2025, published by long-running FINRA foe the Heritage Foundation, and a blueprint for the Trump presidency, calls for the self-regulator to be eliminated.

Despite the attacks, FINRA is still the central regulator of the securities industry.

And the organization had its defenders in the March hearings in Congress.

“The Exchange Act’s model of securities industry self-regulation is grounded in certain core principles, which continue to resonate today,” said Onnig Dombalagian, professor of law at Tulane University, in written testimony.

“These include the industry’s familiarity with securities market operations, its reputational interest in upholding mutual and reciprocal principles of trade, and the ability to shift the financial burden of regulation to the industry through membership fees and other revenue sources,” Dombalagian notes.

“As markets have evolved, SROs including FINRA also maintain critical infrastructures for advancing the goals of the national market system, such as information processing and dissemination services, market and member surveillance systems, and other utilities,” he adds.

FINRA’s been in the hot seat before.

It spent 2024 and 2025 fighting a lawsuit that in part alleged the organization didn’t have a constitutional reason to exist. It ultimately prevailed when the Supreme Court last June declined to hear the appeal of Alpine Securities, the firm suing FINRA.

That left in place a lower court’s ruling that gives FINRA the authority for enforcement action but required it to check with the SEC before expelling a firm.

“We’ve seen more attacks on FINRA the last couple years than in decades before,” Ressler says. From the Alpine lawsuit to hearings in Congress, FINRA is being questioned for its reason to exist.”