FINRA 2025 Rule Changes: What Financial Firms Must Do to Stay Compliant

Introduction

If you work in finance or invest in the market, you’re likely familiar with the Financial Industry Regulatory Authority, better known as FINRA. As the nonprofit regulatory body overseeing the U.S. financial industry, FINRA plays a critical role in protecting investors and maintaining market integrity. It sets and enforces the rules that govern brokerage firms, securities professionals, and securities markets, ensuring fair, transparent, and ethical financial practices.

Compliance with FINRA regulations is not only a legal requirement, but an essential for safeguarding both firm and client data. Financial firms must implement cybersecurity measures to prevent sensitive financial information from falling into the wrong hands, which could damage their reputation and damage client trust. Beyond security, noncompliance can result in severe penalties, including hefty fines and operational restrictions.

To address evolving risks, FINRA has released its 2025 Regulatory Oversight Report, outlining key updates that firms need to be aware of. These updates focus on critical areas such as third-party risk management, cybersecurity, artificial intelligence, and investment fraud. “This report is a valuable tool that we provide to member firms in support of our self-regulatory mission to protect investors and ensure market integrity. The topics reflect areas where FINRA has observed gaps in firm compliance programs as well as areas of emerging or increased risk,” explained Greg Ruppert, Executive Vice President and Head of Member Supervision at FINRA in a news release.

In this blog, we’ll break down the major FINRA 2025 rule changes, their impact on financial firms, and the steps you need to take to stay compliant. 

Major FINRA 2025 Rule Changes

The 2025 Regulatory Oversight Report introduced several important updates to FINRA rules, addressing emerging risks and compliance gaps. “The report contains new topics, including a section addressing the third-party risk landscape, and many that will be familiar—such as cybersecurity and cyber-enabled fraud, communications with the public, and Regulation Best Interest and Form CRS—which have been updated to reflect evolving risks, industry trends, and exam findings,” said Greg Ruppert, Executive Vice President and Head of Member Supervision at FINRA.

Here are the key updates financial firms must prepare for:

Enhanced Cybersecurity and Data Protection Requirements

With cyber threats growing in frequency and sophistication, FINRA has strengthened security expectations for financial firms. New best practices include:

• Monitoring for Account Intrusions: Identifying and responding to suspicious account activity, including unauthorized transactions.
  
  
• Detecting Imposter Domains: Proactively scanning for fraudulent domains mimicking firms and taking action to notify affected clients.
  
  
• Outbound Email Security: Implementing tools to scan outgoing emails for sensitive customer information and prevent data leaks.
  
  
• Identity Verification: Strengthening authentication processes for new accounts using risk-based scoring and third-party validation services.
  
  
• Incident Response Testing: Conducting regular tabletop exercises (TTX) to evaluate cyber preparedness and response strategies.
  
  
• Network Segmentation: Restricting lateral movement within systems to minimize the impact of potential breaches.
  
  
• Security Awareness Training: Educating employees on phishing, social engineering, and other cyber threats to enhance frontline defenses.

Stricter Record-Keeping and Reporting Obligations

FINRA has reinforced the requirements for maintaining, supervising, and preserving business-related communications, including emails, texts, and chat messages. Key updates include:

• Expanded Supervision Rules: Firms must implement written procedures ensuring proper documentation and supervision of all business communications.
  
  
• Electronic Recordkeeping Compliance: Firms using third-party electronic recordkeeping services must update their compliance procedures to align with recent SEC amendments.
  
  
• Enhanced Access Requirements: Firms must ensure timely access to stored records and comply with new third-party access undertaking requirements under SEA Rule 17a-4.

Increased Oversight of Third-Party Vendors

With rising cyberattacks and outages affecting third-party providers, FINRA has emphasized stronger vendor risk management. Firms must:

• Maintain an up-to-date inventory of all third-party vendor services, systems, and software components.
  
  
• Implement supervisory controls and conduct risk assessments on vendor-related security vulnerabilities.
  
  
• Ensure third-party providers do not improperly use Generative AI with sensitive firm or customer data.
  
  
• Regularly review vendor security settings and data protection measures.
  
  
• Revoke vendor access immediately when the relationship ends.

Updated Best Practices for Customer Data Privacy

FINRA has updated privacy expectations to align with evolving data protection risks. Firms should:

• Strengthen encryption and access controls for customer data storage and transmission.
  
  
• Implement strict policies for handling personally identifiable information (PII).
  
  
• Provide enhanced transparency on data collection and sharing practices to customers.
  
  
• Conduct periodic privacy audits to ensure compliance with regulatory standards.

Staying ahead of these updates is crucial for maintaining compliance, protecting client data, and avoiding costly penalties.

How These Changes Affect Financial Firms

The 2025 FINRA Regulatory Oversight Report highlights key areas where firms must enhance compliance, address emerging risks, and adapt to evolving regulatory expectations. These changes introduce:

New Compliance Burdens and Operational Adjustments

With FINRA identifying gaps in firm compliance programs and emerging risks, firms must take proactive steps to strengthen their regulatory frameworks. This means updating internal policies, implementing enhanced supervision and monitoring processes, and ensuring proper documentation of all regulatory actions. Operationally, firms may need to invest in compliance technology, train employees on new requirements, and establish more oversight of vendor relationships.

Increased Scrutiny from Regulators

Regulators will be closely monitoring how firms adopt and implement these new rules. Stephanie Dumont, Executive Vice President and Head of Market Regulation and Transparency Services at FINRA, emphasized the importance of these efforts by saying, “Monitoring the markets, anticipating and addressing risks, identifying and investigating trading violations, and leveraging data are all part of the important work that FINRA does to safeguard the integrity of our vibrant capital markets to ensure that everyone can invest with confidence.”

Firms must be prepared for more frequent audits and enforcement actions, particularly in high-risk areas such as cybersecurity, record-keeping, and third-party vendor oversight.

The Role of Technology in Ensuring Compliance

Technology plays a dual role in compliance, both as a challenge and a solution. Some regulatory updates were prompted by the risks associated with third-party technology providers and the use of artificial intelligence in financial services. To ensure compliance, firms should leverage advanced security tools, data analytics, and automated compliance solutions to detect potential violations, enhance data protection, and streamline regulatory reporting. Additionally, firms should continuously update their cybersecurity measures to mitigate threats posed by sophisticated cyberattacks and AI-driven fraud.

Steps to Achieve FINRA Compliance in 2025

While the evolving FINRA regulations may seem overwhelming, achieving compliance can be done with a few actionable steps. By taking a strategic approach and leveraging expert support, financial firms can meet expectations with these four steps:

1. Conduct a Compliance Gap Analysis

The first step is identifying where your firm falls short in meeting FINRA’s cybersecurity and compliance standards. Partnering with a Managed Service Provider (MSP) can help conduct a compliance gap analysis, pinpointing vulnerabilities in your current cybersecurity and operational frameworks. An MSP will then provide a detailed roadmap outlining the necessary improvements to align with FINRA’s evolving security requirements. Addressing these gaps proactively will put your firm on the right path to meeting both new and existing FINRA guidelines.

2. Strengthen IT Security and Implement Data Encryption

Once compliance gaps are identified, strengthening IT security is crucial. A key requirement under FINRA guidelines is data encryption, which ensures sensitive financial data is securely stored (at rest) and protected during transmission. An MSP can help implement encryption algorithms that:

• Resist known cyberattacks
• Ensure seamless encryption and decryption without performance issues
• Remain compatible with your firm’s software and hardware
• Securely store and back up encryption keys to prevent data loss

Beyond encryption, an MSP will also bolster security by implementing:

• Multi-Factor Authentication (MFA) & Access Controls to prevent unauthorized access
• Network and Endpoint Monitoring to detect and mitigate threats in real time
• Vulnerability Scanning & Regular Patching to address potential exploits before they become a risk

By enhancing cybersecurity defenses, firms can ensure regulatory compliance while minimizing risks.

3. Improve Record-Keeping and Audit Trails

Accurate and secure record-keeping is a major part of FINRA compliance. Firms must maintain detailed audit trails to demonstrate compliance with financial regulations. An MSP can assist in:

• Implementing automated record-keeping systems to ensure all transactions and communications are securely stored and easily retrievable
• Enhancing data integrity measures to prevent tampering or unauthorized modifications
• Streamlining audit processes by organizing financial records in a way that aligns with FINRA’s reporting expectations
• By modernizing record-keeping systems, firms can reduce regulatory risks and simplify FINRA audits.

4. Train Employees on the Latest Regulatory Requirements

Compliance isn’t just about technology, it’s also about people. Employees must be well-versed in the latest FINRA updates and cybersecurity best practices. An MSP can provide ongoing security awareness training to help employees:

• Recognize phishing emails, malicious links, and social engineering schemes
• Develop protocols for reporting security incidents to minimize their impact
• Stay updated on emerging cyber threats that could compromise compliance

By creating a culture of security awareness, financial firms can mitigate risks and ensure regulatory adherence.

Conclusion

FINRA’s regulations are designed to protect investors and uphold market integrity, and staying compliant is essential for financial firms. Non-compliance can lead to hefty fines, legal challenges, and reputational damage, making it critical to take a proactive approach.

Partnering with a cybersecurity-focused MSP like Charles IT ensures your firm has the right solutions in place to stay audit-ready and FINRA compliant, helping you avoid penalties and operational disruptions.

Charles IT specializes in helping financial firms navigate complex regulations, providing expert guidance and cutting-edge security solutions. Don’t wait, schedule a call with our team today to ensure your firm is prepared for these regulatory changes.