FINRA, the securities industry's self-regulatory organization, entered 2026 under renewed political pressure as congressional hearings in March laid bare the doubts some lawmakers harbor about its legitimacy. The organization, which oversees 3,249 firms and 634,508 registered representatives as of December 2024, faced pointed questions from members of the House Capital Markets Subcommittee about its authority and transparency.
Republican Representative Lisa McClain of Michigan criticized FINRA for exercising government-level power without corresponding accountability. "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," McClain said. "Yet, FINRA is not subject to the same transparency laws as federal agencies." She noted that its meetings are not fully open and its records are not fully public.
Ohio Republican Warren Davidson echoed these concerns, pointing out that FINRA is not subject to the Administrative Procedures Act, the Freedom of Information Act, or direct congressional appropriations. "So members of this committee have had similar concerns about the structure of the Federal Reserve, for example," Davidson added.
The hearings come amid a broader anti-regulatory environment under the Trump administration, which has pushed to reduce rules and allow advisors to sell more alternative investments in retirement plans. Project 2025, a blueprint published by the Heritage Foundation—a longtime FINRA critic—calls for the elimination of the self-regulator.
Despite the attacks, FINRA has taken steps to improve its relationship with the industry. Recent changes have made the enforcement process somewhat easier for broker-dealers, and the organization announced a $100 million rebate to the firms it oversees. This move drew criticism from the plaintiff's bar, which argued the funds should go to investors who won arbitration awards but never received payment.
FINRA also prevailed in a significant legal battle in 2025 when the Supreme Court declined to hear an appeal from Alpine Securities, which had challenged the organization's constitutional authority. The lower court's ruling affirmed FINRA's enforcement powers but required it to consult the SEC before expelling a firm.
"We've seen more attacks on FINRA the last couple years than in decades before," said Sander Ressler, managing director of Essential Edge Compliance Outsourcing Services. "From the Alpine lawsuit to hearings in Congress, FINRA is being questioned for its reason to exist." Ressler noted that lawmakers are concerned about whether a membership organization that regulates the industry can effectively oversee its largest contributors.
FINRA has its defenders, including Tulane University law professor Onnig Dombalagian, who testified that the self-regulatory model is grounded in core principles such as the industry's familiarity with market operations and its reputational interest in upholding trade standards. He also highlighted FINRA's role in maintaining critical infrastructure for market surveillance and information processing.
A FINRA spokesperson defended the organization, stating: "As a self-regulatory organization, FINRA protects investors and safeguards market integrity at zero cost to the American taxpayer." The organization operates under the aegis of the SEC and funds its budget through fees charged to broker-dealers.
For advisors and firms, the ongoing scrutiny of FINRA's role could have significant implications. The Sixth Circuit's recent rejection of a FINRA jurisdiction challenge and the $2.7 million arbitration award against Arkadios Capital highlight the organization's continued enforcement reach. Meanwhile, the elimination of the $25,000 PDT minimum and record broker headcount of 639,723 in 2025 show the evolving regulatory landscape.
