In an update to its examination process, the Financial Industry Regulatory Authority is giving broker-dealers advance notification on the schedule and timing of exams.
Jim Reese, senior vice president and head of exams for FINRA, discussed some of the details of the authority’s revised approach on a recent FINRA Unscripted podcast.
Starting this past January, FINRA started notifying firms not only about upcoming examinations, but also which quarter those exams are expected to occur. The reforms are part of FINRA Forward, the organization’s initiative focused on improving regulatory effectiveness and efficiency while reducing unnecessary burdens on firms.
Reese noted that for broker-dealers, “it’s challenging to resource examinations, to adequately respond to exam inquiries. They’re getting pinged by other regulators. They’re getting pinged by both at the state and federal level, and in some cases, even international regulatory authorities.”
He added, “they’re also trying to conduct business and respond to customers and trying to take an objective look and say, how can we better bring firms into the fold kind of around how we plan for our examinations and bring efficiency to the overall process?”
FINRA said the goal of giving firms greater visibility into the exam process is to help them better plan resources and prepare for examinations while maintaining flexibility for risk-based oversight.
While it’s FINRA’s “obligation to conduct robust oversight … it’s also our responsibility to do so in a way that avoids imposing [un]necessary burdens,” Reese said.
FINRA said that it evaluated prior scheduling patterns before implementing the change to ensure firms could reasonably rely on the projected exam timing.
“Again, this change supports our FINRA Forward [rulebook revamp] goals by providing firms greater visibility around resource planning and allocation while maintaining, of course, the flexibility we need for our risk-informed examination approach”, said Reese.
FINRA published its 2026 exam schedule after first-quarter exams were announced and intends to publish the entire exam schedule for 2027 before announcing quarterly exams.
FINRA has “built an infrastructure that allowed us to evaluate our previous schedules to see how often firms moved from quarter to quarter to ensure that if we were being transparent and saying, ‘Hey, we’re going to come in on this quarter,’ that we actually would be able to maintain that commitment for a large portion” of firms, Demetrios Koutros, FINRA’s senior vice president of Member Supervision’s operations, procedures and standards, added on the podcast.
When examinations are longer or more complex regulators may finalize conclusions on some issues before the broader review is complete. Under the updated process, firms can choose to receive those findings in writing earlier in the examination timeline.
“There are situations where maybe in some of our exams that extend for a longer period of time than others, where we may be drawing conclusions or reaching finality on certain findings earlier than other aspects of that examination,” Reese said. “And we want firms to have the opportunity, should they select to have it … to provide them those findings in writing earlier on or at the time that we’ve concluded that particular review.”
This “not only helps increase that level of transparency, but also helps firms take that information and make decisions internally as to what steps they may need to start to take as far as corrective action,” Reese added. “It also gives them an opportunity to provide us potentially additional documentation or context that maybe we previously didn’t have an opportunity to consider and really helps move some of that opportunity further into the exam process, allowing the firms to more proactively engage with us and address those issues more timely.”
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