CSG Law Alert: Fast Talk, Slow Walk – FINRA’s Enforcement Paradox
On June 30, 2026, Paul R. Eckert and Troy A. Paredes released their much-anticipated report on FINRA’s enforcement program (the “Report”). The Report recommends several changes to improve the transparency, efficiency, and fairness of FINRA’s Enforcement Department. Among the most significant is a recommendation that FINRA adopt a limitations period for enforcement matters.
As we previously explained in our October Client Alert, a limitations period is not merely a sound policy choice; it is required by FINRA’s congressional mandate to provide a “fair” disciplinary process.1 Limitations periods are an essential component of any fair system of justice. In addition to perhaps the most obvious reason—protecting respondents from having to defend themselves against cases that are so old that witnesses are gone or their memories have faded and evidence is stale if not lost—they provide a fair limit on the amount of time an investigation can hang over the head of a respondent. Ask any person or entity who has been the subject of a FINRA enforcement investigation, and they will tell you: The emotional toll is overwhelming, the legal fees are punishing, and the drain on productivity is substantial.
To their credit, Eckert and Paredes also recognize the importance of a limitations period for FINRA enforcement matters, observing: “Congress, the SEC, and [self-regulatory organizations (SROs)] – as well as courts – have long expressed concerns about the fairness of years-long delays before the initiation of an enforcement action or disciplinary proceeding involving alleged noncompliance with the federal securities laws or SRO rules.” Ultimately, Eckert and Paredes recommend that FINRA adopt a five-year limitations period, with “perhaps incrementally longer periods” for certain matters involving fraudulent or manipulative conduct or customer harm.
We asked ourselves: What would be the practical effect of a five-year limitations period? To answer that question, we reviewed all FINRA settlements with member firms from January 1, 2024, through June 30, 2026. We then compared the start and end dates of the violative conduct alleged by FINRA in those settlements against a theoretical five-year limitations period to determine how many settlements included alleged misconduct that occurred more than five years before the AWC was issued.
During that two-and-a-half-year period, FINRA issued 401 Letters of Acceptance, Waiver and Consent (AWCs) against member firms. In approximately 250 of those AWCs, at least some of the misconduct alleged by FINRA occurred more than five years before the AWC was issued. In more than 20 instances, the entire period of misconduct alleged by FINRA began and ended more than five years before FINRA issued the AWC. Put differently, a five-year limitations period would have precluded FINRA from charging some of the alleged violative conduct in more than 60% of its settlements against firms—and would have barred the entire case in roughly 5% of those settlements.
In other words, right now it is more common than not for FINRA member firms to be charged for conduct that happened so many years ago that the charges would be time-barred, at least in part, if pursued by the SEC or CFTC. That is unfair and unacceptable, especially for an SRO, which should be extending its own member firms at least the same basic rights and protections that are extended to them by the SEC and the CFTC.
FINRA itself has conceded that faster, more efficient investigations and enforcement actions are essential to its mission of protecting investors. As part of its FINRA Forward initiative, FINRA has stated: “By enabling faster, more efficient resolution of issues, these enhancements will ultimately strengthen investor protection and market integrity—our core mission”; and “Efficient enforcement is essential for the timely resolution of issues that can put investors and markets at risk” (emphasis added).2
If FINRA truly believes that a “faster, more efficient resolution of issues” is essential to promoting a fair process for its members and protecting investors and the markets, it should hold itself accountable to those imperatives by imposing a limitations period. Otherwise, the platitudes will remain just that—platitudes—while the reality will continue to be protracted investigations of misconduct from a bygone era.
1 The Maloney Act, which authorized the creation of self-regulatory organizations (“SROs”) like FINRA, explicitly conditioned that authorization on each SRO providing “a fair procedure for the disciplining of members and persons associated with members.”
2 See “Enhancing Our Enforcement Program” by Bill St. Louis (March 2, 2026), available at www.finra.org/media-center/blog/enhancing-our-enforcement-program.