The FINRA Five: How to Enhance Your Firm’s Cybersecurity


It can be said with certainty that FINRA has been a vital part of the United States’ financial landscape, ever since it was established back in 2007, through the consolidation of the National Association of Securities Dealers (NASD) and New York Stock Exchange (NYSE) Regulation. Unlike the United States Securities and Exchange Commission (SEC), FINRA is not a government agency.

While it is authorized by Congress, FINRA is the United States securities industry’s largest self-regulatory organization. It was created to fulfil the need for a unified regulatory framework that could oversee the complexities of the evolving securities industry. It’s prime directive is to safeguard investors’ interests, preserve market integrity, and foster fair practices within the securities market.

🧠 CRASH COURSE: FINRA, the Financial Industry Regulatory Authority, is the largest non-governmental regulator for all securities firms doing business with the U.S. public. Created in 2007 through the consolidation of NASD and NYSE Member Regulation, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services.

It’s crucial for financial firms to ensure FINRA compliance in order to adhere to standards that promote transparency, accountability, and ethical conduct. Yet, navigating FINRA’s rules and guidelines can be challenging for many finance firms, due to the dynamic nature of the financial landscape, evolving regulatory guidelines, and the complexity of the compliance procedures.

💡 DID YOU KNOW: FINRA pretty much oversees every aspect of the securities business. They’re the one-stop shop for handling everything from educating industry professionals on best practices to enforcing rules, and regulations, and federal laws.

This stems from the vast array of regulations, frequent updates, and the need for specialized expertise to interpret and implement these guidelines effectively.

We understand that keeping up with the constantly evolving compliance framework can be demanding, especially if you don’t have the proper resources to conduct IT security assessments. That’s why in this guide, we’re breaking down the basics of FINRA compliance. From understanding regulatory requirements to implementing robust security measures, we’ll discuss strategies to help you reach FINRA compliance, including the invaluable role of consulting with an experienced MSP like Charles IT. Let us simplify the process and empower your firm to navigate the intricacies of FINRA regulations with confidence.



FINRA stands for the Financial Industry Regulatory Authority. It’s a regulatory organization that oversees securities firms operating in the United States. FINRA is responsible for enforcing rules and regulations to ensure fair and ethical practices within the financial industry, particularly in areas like trading securities, investment banking, and brokerage firms. Or in basic terms, FINRA is like a watchdog or a referee for the world of investing and trading in the United States. It also helps investors and brokers solve disputes without having to go through court.

Who Does FINRA Impact?

FINRA impacts stakeholders in the financial industry including:

  • Financial Firms: FINRA oversees over 4,200 securities firms, which encompasses broker-dealers, investment banks, securities exchanges, and other financial institutions.
  • Securities Professionals: FINRA oversees 624,000 registered representatives, who are brokers, financial advisors, traders, and investment bankers.
  • Investors: FINRA protects investors by giving them information on products, safeguarding them from fraud and misconduct, and helping them resolve disputes.
  • Other Regulators: FINRA is its own self-regulatory organization with 3,600 employees, but it works with other regulatory agencies like the U.S. Securities and Exchange Commission (SEC).

What Does It Mean To Be FINRA Compliant

Being FINRA compliant means following all the rules and regulations set by FINRA. It involves meeting the standards and requirements established by FINRA to ensure fair, transparent, and ethical practices within the securities industry.

This includes things like adhering to licensing and registration requirements, maintaining accurate records, providing investors with proper disclosures, and conducting business in a way that protects investors’ interests. To sum it up, it’s essentially playing by the rules set out by FINRA to promote trust and integrity in the financial markets.

The Importance of FINRA Compliance

The finance industry is more susceptible to cyber-attacks than many other industries. Let’s break down some of the reasons why:

Financial Gain

It shouldn’t come as a surprise that finance firms are often a target for cybercriminals because they handle vast amounts of money, as well as financial data and valuable assets.

Sensitive Data

Finance firms often process sensitive personal information like account details, social security numbers, and credit card numbers.

Complex IT Infrastructure

Finance firms usually are connected to multiple systems, applications, and networks, which gives hackers more opportunities to gain access.

Sophisticated Attack Techniques

Cybercriminals are consistently working to find new ways exploit weaknesses in a finance firm’s cybersecurity defense through ransomware, malware, and social engineering, like phishing.

High-Profile Reputation

It’s important for finance firms to have a good reputation and brand value. Attackers are aware of this and can target finance firms to damage that reputation and break customer trust, which results in loss of business.

Interconnected Systems

Finance firms frequently work with customers, partners, and third-party vendors, which increases the risk of supply chain attacks.

Cybercriminals will always be looking for vulnerabilities in a finance firm’s security infrastructure to access valuable data. That’s why it’s important for companies to follow FINRA’s regulatory standards.

🎤 HEAR US OUT: “The creation of FINRA is the most significant modernization of the self-regulatory regime in decades, …by eliminating overlapping regulation and establishing a uniform set of rules placing oversight responsibility in a single organization, we will enhance investor protection while increasing the competitiveness of our financial markets.” said Mary L. Schapiro, Chief Executive Officer of FINRA.

What Kind of Threats Are Finance Firms Dealing With?

  • Cloud Security Issues: A cloud breach can expose customer and financial data, as well as trade secrets. It can also disrupt essential financial services like online banking.
  • Ransomware: Ransomware attacks can cripple a financial firm’s operations, which can then lead to financial loss and damage to their reputation. 
  • Social Engineering: Victims can be tricked into sending money, or authorizing a fraudulent transaction, which would negatively impact customer trust and brand image. 
  • Advanced Persistent Threats: APTs can result in the theft of sensitive personal and financial information, which could cause financial losses, outages, or lost access to funds. 
  • Mobile Banking Threats: Login credentials could be stolen for access and drain accounts. Malware can also steal sensitive information from mobile devices. 
  • Insider Threats: Employees with malicious intent could steal data and commit financial crimes, like embezzlement.


Unfortunately, that’s just the beginning. For more, check out The Top 10 Cybersecurity Threats Facing Financial Firms in 2024 (



FINRA’s Five Core Functions: How to Enhance Your Finance Firm’s Cybersecurity

Strengthen your finance firm’s cybersecurity posture by diving into FINRA’s cybersecurity checklist, which is mainly derived from the National Institute of Standards and Technology’s Cybersecurity Framework, or NIST CSF. Discover actionable insights to fortify your defenses and safeguard your firm against cyber threats.

ⓘ  Visit to learn more

The Five Core Functions

1. Identify

Take inventory of assets that need to be protected, with a focus on risk management, asset vulnerabilities, and data classification.

  • Inventory: Create an inventory of all assets that store personal information (Name, social security number, etc.) or sensitive financial data (customer’s accounts). 
  • Determine Risks: Monitor cybersecurity provided by any third-party vendors after thoroughly assessing their capabilities and qualifications before doing business with them. 
  • Access Controls: Implement access controls to limit users’ access to the systems.  
  • Non-Disclosure Agreements: Review third-party confidentiality and other NDA contracts to protect systems’ data. 

2. Protect

Ensure information security safeguards align with the firm’s priorities and information classification levels.

  • Password Protection: Enforce long and complex passwords for all information assets and systems that store or transmit firm sensitive data.
  • Malware/Anti-Virus Protection: Install and regularly update anti-virus software.
  • Multi-Factor Authentication: Use MFA to protect sensitive systems from unauthorized user access. 
  • Encryption: Encrypt data in transit and at rest to prevent unauthorized disclosure of data. 
  • Automated Patching: Conduct software patching for operating systems, applications, and firmware to reduce the risk of security breach from unpatched vulnerabilities.
  • Data Loss Prevention: Ensure sensitive information isn’t lost or accessed by unauthorized users with data discovery, data monitoring or policy enforcement capabilities. 
  • Access Monitoring: Utilize access monitoring tools to prevent unauthorized access or misuse of data with alerts that detect suspicious behavior.
  • Cybersecurity Awareness Training: Train employees to recognize risks with advanced methods like phishing simulation. 

3. Detect

Explore how the financial firm provides the means to proactively detect potential threats.

  • Risk Assessment: Perform internal and external penetration testing on systems and web applications.
  • Intrusion Detection System: Monitor traffic for suspicious activity and known threats to immediately take action when a potential threat is detected.   
  • Vulnerability Scanning: Identify and mitigate security risks by scanning for threats to the network outside of the organization and then act on those findings by upgrading software, applying patches, and removing outdated devices.

4. Respond

Assign key roles and actions for when a potential security incident is detected.

  • Response Plan: Ensure that a cybersecurity incident management system is in place to track, review. and report cyber-attacks. 
  • Defensive Measures: Create a list of defensive measures to take in the case of a cybersecurity incident. 
  • Allocate Resources: Ensure the firm is training staff on roles and responses following a cybersecurity incident.

5. Recover

Strategize how to quickly restore affected capabilities and services after a cybersecurity incident with minimal damage to the financial firm and unscheduled downtime.

  • Backup and Recovery Plan: Ensure that regular backups are performed on firm sensitive data and that a plan is in place for retrieving that data. 
  • Incident Response: Ensure that the above plan is well documented and put into effect in the case of a cybersecurity incident. 
  • Network Monitoring: Implement monitoring controls to enhance activity monitoring for individuals who pose an increased level of risk. 

What is the difference between FINRA, SEC, and other financial frameworks?

What is SEC compliance?

Like FINRA, the SEC (Securities and Exchange Commission) is an important organization that oversees the financial industry, yet each has a different role. Sure, both work to protect investors and ensure the integrity of the financial markets, but FINRA focuses on regulating brokers and brokerage firms.

The SEC has a broader authority in that it regulates various aspects of the entire securities industry like investment advisers, exchanges, and companies issuing securities. FINRA is also a not-for-profit, private entity that is not part of the government. SEC on the other hand, is a government organization. Most notably though, the SEC oversees FINRA and serves as the first level of appeals for any actions brought on by FINRA.

FINRA and the SEC aren’t the only regulatory frameworks either. As previously mentioned, there’s also NIST-CSF, the cybersecurity framework from the National Institute of Standards and Technology, which FINRA sources its cybersecurity checklist from. NIST-CSF helps businesses manage their cybersecurity risks and protect their systems and data but doesn’t exclusively apply to the financial industry.

There’s also SOX, the Sarbanes- Oxley act of 2022, which was put in place to develop internal checks on organizations to avoid fraudulent financial transactions. 

Then there’s GLBA, the Gramm-Leach-Bliley Act, which was enacted to require financial firms to develop and implement cybersecurity plans to protect customers’ confidential data. Lastly, there’s PCI DSS, also known as the Payment Card Industry Security Standards Council, which is a set of guidelines created by and for credit card companies with the goal of maintaining secure credit card transactions.

💡 LEARN MORE: For more details on each cybersecurity framework, check out The 5 Best Cybersecurity Frameworks for Financial Firms (

What happens if you are not FINRA compliant?

There are some serious consequences for brokerage firms or individuals who are not in compliance with FINRA. Let’s outline the five potential ramifications:

  • Penalties and Fines: These can range from thousands to millions of dollars, depending on the violation.
  • Legal Consequences: Civil lawsuits, arbitration claims, and even criminal charges are all possible, especially if investors face financial loss due to non-compliance.
  • Suspension or Loss of Licenses: A suspended or revoked license can prevent an individual from working in the financial industry, which in turn would negatively impact their career.
  • Regulatory Action: Formal warnings and censures can be issued, as well as a restriction on activities.
  • Reputation Damage: A brokerage firm or individual could lose credibility in the industry, which can lead to a loss of trust among investors, clients, and other people who work in the market.

Can you be barred by FINRA?

FINRA can bar a firm or individual by revoking their license or registration, which prevents them from conducting business in the financial industry. This can be permanent or temporary, depending on the severity of the violation, and can happen for a variety of reasons like fraud, theft, or not complying with their regulations. Once barred by FINRA, it may be hard for an individual to find employment in the financial industry because their reputation would be severely damaged.

FINRA even has a list of barred individuals featured on their website. If you are concerned about managing your FINRA compliance, it’s recommended to look into outsourcing your IT. This can be a strategic move in order to prevent being barred by FINRA.


3 Simple Steps To FINRA Compliance

Step 1: Complete a Gap Assessment

That’s a complete evaluation of your current cybersecurity posture with the purpose of locating any gaps in your security infrastructure, in comparison to the security standards set by FINRA.

Step 2: Enlist in the IT Security Services Necessary for FINRA compliance

FINRA demands a strong IT security infrastructure. To safeguard your sensitive financial data and meet regulatory requirements, you must invest in a range of essential services designed to strengthen your digital defenses. These IT services include:

  • Backup and Disaster Recovery
  • Incident Response
  • Endpoint Encryption
  • External Vulnerability Scanning
  • Internal Vulnerability Scanning
  • Multi-Factor Authentication
  • SIEM
  • Penetration Testing Management
  • Managed Detection and Response (MDR)

Step 3: Ensure Ongoing Data Management with Access Controls

Effective data management hinges on more than just storage and organization—it requires strict access controls. You can mitigate data breaches and ensure compliance by implementing access controls that assist in:

  • Monitoring and analyzing cybersecurity events.
  • Educating your staff with Cybersecurity Awareness Training
  • Regularly updating policies and procedures regarding cybersecurity incidents
  • Conducting security drills like phishing simulations
  • Scanning the dark web to see if any financial data has been compromised.

Strategies for Achieving FINRA Compliance with the Support of An MSP

n the fast-paced and heavily regulated world of finance, ensuring compliance with FINRA regulations is paramount for brokerage firms. However, navigating the complexities of compliance can be overwhelming, especially for firms lacking dedicated IT resources or expertise. This is where partnering with a Managed Service Provider (MSP) can be invaluable.

Let’s explore how collaborating with an MSP like Charles IT can eliminate the stress of achieving FINRA compliance and enhance your firm’s cybersecurity posture.

Leveraging MSP Expertise for FINRA Compliance

Comprehensive IT Support Solutions: Partnering with an MSP specializing in IT consulting and support for businesses offers access to a wide range of comprehensive IT solutions tailored to meet the specific needs of finance firms. From network security assessments to data encryption protocols, MSPs like Charles IT can implement robust cybersecurity measures aligned with FINRA’s regulatory requirements. By leveraging the expertise of seasoned IT professionals, finance firms can better identify and proactively address compliance challenges and mitigate security risks.

Proactive Compliance Management: Achieving and maintaining FINRA compliance requires proactive monitoring and management of IT systems and infrastructure. MSPs play a pivotal role in providing ongoing support and maintenance services to ensure that finance firms remain compliant with regulatory standards. Through regular audits, security assessments, and software updates, MSPs help identify and address compliance gaps, minimizing the risk of regulatory violations and associated penalties. By partnering with an MSP, finance firms can establish a proactive compliance framework that prioritizes regulatory adherence and cybersecurity resilience.

The Benefits of Partnering with Charles IT

By collaborating with Charles IT, finance firms can unlock a multitude of benefits that facilitate FINRA compliance and bolster cybersecurity defenses:

Tailored Compliance Solutions: Charles IT offers customized compliance solutions designed to address the unique regulatory requirements and operational challenges faced by finance firms. From risk assessment to incident response planning, our team delivers tailored solutions that align with FINRA guidelines and industry best practices.

24/7 Monitoring and Support: With round-the-clock monitoring and support services, Charles IT ensures continuous oversight of critical IT infrastructure and systems. Our proactive approach to cybersecurity allows finance firms to detect and mitigate potential threats in real-time, minimizing the risk of data breaches and compliance violations.

Customized IT Roadmap: We recognize that each business is unique and that achieving full compliance is a journey. Your Charles IT Account Manager will collaborate with you to create a personalized IT roadmap tailored to your specific needs and budget. This roadmap prioritizes addressing the highest risk security issues identified in your gap assessment, ensuring a strategic and effective implementation plan.



All in all, it’s crucial for brokerage firms, brokers, and other securities professionals operating within the financial industry to maintain FINRA compliance. By adhering to FINRA’s rules and standards, firms are committing to ethical conduct, investor protection, and regulatory compliance. That in turn will foster trust and confidence among clients, investors, and other market participants.

FINRA compliance not only helps safeguard investors’ interests and maintain market integrity, but also protects firms from potential fines, penalties, and reputational damage associated with non-compliance. Ultimately, being FINRA compliant is not just a legal requirement but also an important aspect of how the stability, fairness, and transparency of the securities markets are maintained, ensuring a level playing field for all participants.

When it comes to achieving FINRA compliance for your brokerage firm, you don’t have to navigate the complexities alone. Partner with Charles IT, your trusted IT consulting company, and Managed Service Provider (MSP) specializing in IT support for businesses. Our experienced team understands the intricacies of FINRA standards and can tailor comprehensive IT solutions to ensure your firm meets regulatory requirements seamlessly.

💬 DROP US A LINE: Contact us today to learn how we can collaborate to strengthen your compliance posture and safeguard your business interests!

Frequently Asked Questions

FINRA, the Financial Industry Regulatory Authority, serves as a vital regulatory body within the U.S. financial landscape. Operating as a non-governmental organization, FINRA plays a crucial role in overseeing brokerage firms and individual brokers, ensuring adherence to stringent standards and regulations aimed at fostering investor protection and market integrity.

At its core, FINRA is tasked with maintaining the integrity and fairness of the securities industry. Through its regulatory framework, FINRA establishes and enforces rules that govern the conduct of brokerage firms and professionals operating within the securities market.

By setting and upholding these standards, FINRA aims to safeguard investors’ interests, promote transparency, and uphold the integrity of the financial markets.

FINRA’s regulatory purview extends to a broad spectrum of entities and professionals within the securities industry. This includes brokerage firms, individual brokers, and various securities professionals involved in buying, selling, and trading securities.

In regulating these entities and individuals, FINRA seeks to instill trust and confidence in the financial markets while ensuring that investors are protected from potential malfeasance or misconduct.

To uphold its regulatory mandate, FINRA employs a multifaceted approach to enforcing compliance within the securities industry. This includes conducting regular examinations and audits of brokerage firms and individual brokers to assess their adherence to regulatory requirements.

Additionally, FINRA investigates complaints and reports of misconduct, leveraging its enforcement authority to take disciplinary actions when warranted. Such actions may include imposing fines, suspending or revoking licenses, or instituting other corrective measures aimed at maintaining market integrity and investor protection.

Ensuring compliance with FINRA regulations can be complex and demanding, requiring meticulous attention to detail and ongoing adherence to evolving standards.

One effective approach to navigating this regulatory landscape is by partnering with a reputable Managed Service Provider (MSP) specializing in regulatory compliance, such as Charles IT. By outsourcing your IT needs to an experienced MSP, you can leverage their expertise and resources to implement robust compliance measures tailored to your firm’s specific requirements.

This proactive approach not only helps streamline compliance efforts but also provides peace of mind, knowing that your firm is well-positioned to meet FINRA’s stringent standards and regulatory obligations.

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