Overview
The Financial Industry Regulatory Authority (FINRA), while not a federal agency, operates under the supervision of the United States Securities and Exchange Commission (SEC). As the SEC aligns more closely with White House deregulation directives, FINRA may experience indirect effects on its rule-making process. The SEC’s enhanced oversight could lead to a more streamlined regulatory environment, potentially influencing FINRA to adjust its policies accordingly. However, as a self-regulatory organization (SRO), FINRA maintains a degree of independence, and the full impact of the recent executive order’s impact remains uncertain at this time.
Recent Executive Branch Directives
The recent directives from the Executive Branch, including President Trump’s initiatives to deregulate and have increased oversight of independent agencies appears to have the potential to impact FINRA.
- Deregulatory Initiatives – On January 31, 2025, President Trump issued Executive Order 14192 (Unleashing Prosperity Through Deregulation), directing agencies to eliminate at least ten existing regulations for each new one (Deregulation Order). Additionally, the total incremental cost of all new regulations, including repealed regulations, must be significantly less than zero. This aggressive approach aims to reduce regulatory burdens across various industries, including financial services.
- Executive Order Enhancing Oversight of Independent Agencies – On February 18, 2025, Executive Order 1426 (Ensuring Accountability for All Agencies) granted the White House direct control over independent regulators, including the Securities and Exchange Commission (SEC). It requires these agencies to submit draft regulations for review and align their strategic plans with the administration’s agenda. The order’s goal is to enhance accountability and reduce regulatory burdens, which the administration argues hinder economic growth.
Potential Impact of Agenda on FINRA
Although these executive orders directly affect the SEC, their influence may extend to FINRA due to the SEC’s supervisory role. The following summarizes certain aspects of the potential impact on FINRA; however, the ultimate outcome will depend on how the SEC implements the agenda, how the courts ultimately rule on court action brought in response to the executive orders, and how FINRA adapts to any new directives.
Adjustments to Rule Making
President Trump’s administration has previously emphasized his plan to free Wall Street from “burdensome regulations” by loosening restrictions on Wall Street so as to make the market more competitive, and allow companies to raise capital with less scrutiny. The administration’s commitment to deregulation, particularly in financial markets, suggests FINRA will face pressure to revise its rules. Key considerations include:
- SEC Oversight on New Rules – Any new FINRA rules that require SEC approval may require a comprehensive review of existing rules, with potential revisions or eliminations to align with the administration’s deregulatory objectives as it attempts to implement new financial regulation on its members.
- Alignment with Deregulatory Goals – Due to the oversight function of the SEC, the SEC will be required to justify new rules with economic impact analyses, or avoid imposing new regulatory burdens, which requirement will in all likelihood be imposed on FINRA.
- Future Executive Orders – If additional orders target financial regulation aimed at reducing regulation, FINRA could face increased pressure to scale back self-regulatory initiatives. Finally, in the event President Trump issues new orders aimed at reducing financial regulations, FINRA could also face pressure to limit or roll back certain self-regulatory initiatives.
Thus, if the SEC moves toward a scaled back regulatory stance, FINRA will likely be required to adjust its rulemaking accordingly.
Potential Impact on FINRA Enforcement Actions
As FINRA operates under the regulatory oversight of the SEC, its enforcement program will likely shift in response to SEC priorities.
President Trump recently appointed Mark T. Uyeda as Acting Charman of the SEC. A longtime SEC official, Uyeda has publicly stated that enforcement should not serve as a tool to impose new regulatory requirements. He has also tightened control over enforcement actions, now requiring SEC commissioner approval for formal investigations, which is a departure from past practice that increases oversight and aligns enforcement with a more business-friendly approach.
Commissioner Uyeda has served on the staff of the SEC since 2006, and is respected for his understanding of the securities industry. To that end, he has publicly stated that while wrong doers will continue to be the target of enforcement by the SEC, enforcement actions should not be used to establish new regulatory requirements, rather he intends to transition the SEC from an enforcement-heavy style to a more guidance-focused style. Towards that goal, he has tightened control over enforcement actions, which now requires SEC commissioners’ approval for any formal investigation to be taken by the SEC. This is a new directive, a departure from past practice, and increases greater control over SEC enforcement which aligns with a more business-friendly approach. This shift may directly impact FINRA in two ways:
- SEC Guidance Influence – A softer SEC enforcement stance could prompt FINRA to focus more on guidance, which is ironically, the focus FINRA had prior to the financial crimes committed by large-scale fraudsters like Stanford and Madoff.
- Changes Resulting from Disciplinary Review – If FINRA members challenge enforcement actions brought against them, the SEC’s new approach may lead to a more lenient resolution process, which could impact future FINRA actions.
If FINRA follows this trend toward deregulation, future disciplinary actions, the arbitration processes, and ultimately, broker-dealer supervision could also be greatly affected.
Market Structure & Crypto Regulations
In addition to enforcement reforms, Chairman Uyeda has prioritized developing a clear regulatory framework for cryptocurrency, aligning with President Trump’s goals. The Crypto Task Force, created under Uyeda’s leadership, is working to establish clear guidelines for crypto asset registration, disclosure, transparency, and to create a transparent and structured regulatory environment. This initiative may influence FINRA in two key areas:
- Crypto Regulation – FINRA may need to adjust its oversight of cryptocurrency-related firms in response to SEC-led initiatives.
- Market Structure Changes – If the administration pushes for market structure reforms, FINRA could face new requirements on trading platforms, disclosures, and transparency standards.
Indirect Impact of Project 2025
Project 2025 is a comprehensive conservative policy blueprint outlining sweeping reforms to federal regulatory structures. It is the product of a broad coalition of conservative policy experts and volunteers coordinated primarily by The Heritage Foundation, a non-profit public policy research institute based in Washington, D.C. While the policy reforms cover a wide range of social and economic issues, a key recommendation impacting this discussion included abolishing SROs, such as FINRA and the Public Company Accounting Oversight Board (PCAOB), or at a minimum, merging their functions into larger bodies such as the SEC so as to streamline oversight and enhance transparency.
Although Project 2025 has fueled discussion among policymakers and critics of existing regulatory structures, the evidence on its direct influence on the current White House agenda remains mixed. While policy debates reference its proposals, such as merging FINRA into the SEC or abolishing other self‐regulatory organizations as part of a broader call for deregulation and governmental downsizing, key figures in the administration have at times dismissed or distanced themselves from specific elements of Project 2025. For example, President Trump has publicly criticized certain proposals from the manifesto, suggesting that while its ideas contribute to the ongoing debate, they haven’t been fully integrated into the official White House policy platform.
Notwithstanding the distancing of the administration from Project 2025, it should be noted that the executive orders addressing deregulation do in fact mirror a number of proposals set forth in this policy. However, there are a number of impediments to transitioning FINRA’s day-to-day oversight of the broker-dealers to the SEC. First, an act of Congress would be required to eliminate FINRA as it is a private corporation, not a government agency. Second, FINRA was originally established to oversee the supervision of the activities of broker-dealers because the SEC was under funded and did not have adequate resources. As the SEC has stated that it is currently underfunded, it seems unlikely that in the current fiscal environment, that Congress would increase the SECs funding to address the cost of oversight functions currently managed by FINRA. However, it should be noted that even without congressional action to merge or abolish FINRA, it is clear that a very real potential result is that FINRA will face increased pressure from the SEC to follow its lead in adapting to the administration’s agenda.
What’s Next?
In summary, while the timing is unclear, the Trump administration’s policy shifts toward increased executive branch oversight, aggressive deregulation, and potential consolidation of financial regulators will in all likelihood shape FINRA’s rule-making and operational strategies. Any executive order or act of Congress that affects the SEC, or broader financial regulation, will likely trickle down to FINRA. Therefore, while FINRA will retain some autonomy as an SRO, changes at the SEC will inevitably influence its regulatory focus and approach as a result of President Trump’s agenda.