Recent SEC and FINRA Joint Actions Explained
- April 1, 2025
- Posted by: 'FINRA Exam Mastery'
- Category: Finance
🏛️ Recent SEC and FINRA Joint Actions Explained
In 2024, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) intensified their collaborative efforts to address significant compliance failures within the securities industry. These joint actions underscore a shared commitment to upholding market integrity and investor protection.
📱 Crackdown on Off-Channel Communications
A major focus of SEC and FINRA’s joint enforcement in 2024 was the widespread use of unauthorized communication channels by financial firms. This initiative, often referred to as the “WhatsApp sweep,” targeted firms where employees used personal devices and messaging apps for business communications, circumventing recordkeeping requirements.Harvard Law Forum on Governance
- In August 2024, the SEC announced charges against 26 firms, resulting in over $390 million in combined penalties for failures to maintain and preserve electronic communications. SEC
- This enforcement action extended to municipal advisors for the first time, highlighting the broad scope of the regulatory crackdown. Harvard Law Forum on Governance
🤖 Addressing Misleading AI Marketing Practices
The SEC also took action against investment advisers for deceptive marketing related to artificial intelligence (AI). In March 2024, two firms faced enforcement actions for “AI-washing,” where they exaggerated or misrepresented their use of AI technologies in client offerings, violating the SEC’s Marketing Rule. FINRA+5Gibson Dunn+5sidley.com+5
⚖️ Legal Challenges Impacting Enforcement Powers
Recent Supreme Court decisions have influenced the enforcement landscape for both the SEC and FINRA:
- SEC v. Jarkesy: The Court ruled that the SEC’s use of in-house administrative law judges for civil enforcement actions seeking monetary penalties violates the Seventh Amendment, requiring such cases to be tried in federal courts. Reuters+1Reuters+1
- Loper Bright Enterprises v. Raimondo: This decision overturned the Chevron deference, limiting federal agencies’ ability to interpret ambiguous statutes without judicial oversight. Reuters
These rulings have prompted reevaluation of enforcement procedures, with potential implications for how both agencies pursue future actions.
🔍 Key Takeaways
- Enhanced Collaboration: The SEC and FINRA are increasingly coordinating to address complex compliance issues, particularly in areas like electronic communications and AI-related disclosures.
- Regulatory Adaptation: Legal developments are reshaping the enforcement strategies of both agencies, emphasizing the need for firms to stay informed and adaptable.
- Compliance Focus: Firms should prioritize robust compliance programs, especially concerning communication practices and marketing representations, to mitigate regulatory risks.
For comprehensive resources and guidance on navigating SEC and FINRA regulations, visit: