Each year, FINRA’s Annual Regulatory Oversight Report serves as a critical resource for compliance professionals, outlining evolving risks, regulatory expectations, and areas where firms continue to face challenges. The 2025 report reflects key developments across multiple risk areas, emphasizing third-party risk management, artificial intelligence (AI), the remote inspections pilot, outside business activities (OBA), private securities transactions (PST), and communications with the public among others.
For firms, these insights are not just a review of recent findings — they offer a roadmap for where FINRA’s examiners will be focusing their attention in 2025. Below, we break down some key takeaways from the report and what they mean for compliance professionals.
1. Third-Party Risk Management
What the Report Says
FINRA continues to stress that firms cannot outsource their regulatory obligations, while reliance on third-party providers grows. The 2025 report underscores increasing regulatory focus on vendor oversight, particularly in areas like cybersecurity, operational resilience, and data security.
Key compliance expectations include:
- Thorough due diligence at onboarding, including an evaluation of financial stability, regulatory history, security protocols, and business continuity measures.
- Ongoing vendor monitoring to ensure continued compliance with industry security standards.
- Contractual clarity—firms must establish agreements that explicitly define security responsibilities, incident reporting procedures, and regulatory obligations.
What This Means for Firms
This emphasis on vendor risk aligns with broader trends across financial services, where regulators are moving toward greater accountability for third-party failures. Firms should expect continued regulatory pressure to demonstrate active oversight over their vendors.
Best Practices:
- Work with technology partners that meet the security standards of the industry’s largest firms and hold recognized accreditations like the Service Organization Control (SOC) 2.
- Look for providers that can address multiple compliance challenges, helping to minimize vendor sprawl and reduce operational risk by leveraging a single provider where possible
- Ensure your vendors have an up-to-date, thorough data governance and disaster recovery plan and proper security measures in place.
2. AI in Compliance: Scrutiny of Transparency & Security
What the Report Says
AI adoption in compliance is accelerating, with firms increasingly leveraging AI for trade surveillance, risk assessment, and marketing compliance. However, FINRA warns of potential pitfalls, particularly when firms rely on third-party AI models that lack transparency or fail to implement governance frameworks to oversee AI-driven decisions.
Key compliance concerns include:
- Explainability & auditability—firms must ensure AI-generated decisions can be understood, tested, and justified in regulatory reviews.
- Security risks of third-party AI models, particularly when customer data is processed externally with unclear data governance protocols.
- Growing expectations for AI risk management—FINRA is signaling that firms should formalize oversight frameworks for AI tools, ensuring they are aligned with supervision obligations under Rule 3110.
How RegEd Supports Responsible Use of AI in Compliance
RegEd has taken a methodical, proprietary approach to AI development, working alongside some of the largest firms in the industry through our strategic AI working group. The result is our AI-powered Advertising Review solution, which enables firms to accelerate marketing compliance reviews while maintaining full transparency and regulatory alignment.
Other AI considerations:
- Be cautious of third-party AI integrations that lack explainability, as these may introduce regulatory and security risks.
- Prioritize AI solutions that are purpose-built for financial services compliance, ensuring auditability and adherence to evolving FINRA expectations.
3. Remote Inspections Pilot Program & RSL Framework
What the Report Says
Remote supervision remains a major area of regulatory experimentation, with FINRA continuing to evaluate the long-term viability of remote inspections. The Remote Inspections Pilot Program is testing whether firms can maintain effective oversight of registered locations without traditional onsite inspections.
Additionally, FINRA’s Residential Supervisory Location (RSL) rule, finalized in 2024, provides a new framework for work from home arrangements, allowing certain locations to be exempt from annual branch inspections if they meet strict compliance criteria.
Key takeaways from the report:
- Firms participating in the Pilot Program must demonstrate that their supervision practices are as rigorous as in-person inspections.
- Cybersecurity and data security risks remain key concerns, especially as remote locations handle sensitive client information outside traditional office environments.
- The RSL framework presents opportunities, but firms must carefully assess eligibility requirements before seeking exemptions from onsite branch audits.
How RegEd Supports Firms in FINRA’s Remote Inspections Pilot Program
RegEd has expanded its Audit Management capabilities to support firms participating in FINRA’s Remote Inspections Pilot Program. As regulators assess whether remote inspections can become a long-term alternative to traditional branch exams, firms need technology-driven solutions that enable compliance teams to conduct inspections remotely while maintaining thorough documentation and supervisory controls.
RegEd’s Audit Management solution enables firms to:
- Designate, track, and manage remote vs. onsite inspections. Firms can categorize and organize inspections based on their approach while ensuring clear tracking and reporting.
- Identify, remediate, and report on Significant Findings. Firms can define and track significant findings, ease the process of follow-up and management oversight, and ensure proper documentation.
- Enhance reporting flexibility. New features allow firms to meet quarterly regulatory reporting requirements under 3110.18, including tracking the number of onsite vs. remote inspections, findings, significant findings, and categories of significant findings.
With FINRA continuing to evaluate the pilot program’s success, firms leveraging robust audit management technology will be best positioned to adapt to future regulatory guidance on remote supervision. RegEd is committed to closely monitoring all regulatory developments and ensuring our Audit Management solution continues to ease the process of adapting to regulatory changes.
4. Outside Business Activities and Private Securities Transactions
What the Report Says
FINRA continues to emphasize the importance of managing Outside Business Activities (OBAs) and Private Securities Transactions (PSTs) to prevent conflicts of interest and regulatory violations. The 2025 report highlights common gaps in firm oversight, particularly in:
- Misinterpretation of Selling Compensation – Some firms fail to recognize indirect benefits (e.g., securities, tax advantages) as selling compensation, leading to inadequate PST oversight.
- Weak Approval Processes – Approving registered representatives’ involvement in OBAs and PSTs without defining how these activities will be supervised is a frequent deficiency.
- Insufficient Documentation – FINRA continues to cite firms for failing to maintain adequate records demonstrating their review and approval process for OBAs and PSTs.
- Overlooking Crypto Asset-Related Activities – Some firms assume crypto-related activities fall outside securities regulations, leading to potential compliance blind spots.
How RegEd Supports OBA and PST Compliance
RegEd’s Conflicts of Interest Management Suite enables firms to track, approve, and monitor OBA and PST disclosures seamlessly, integrating conflict review processes into a centralized compliance framework.
5. Communications & Sales Practices: FINRA’s Intensified Scrutiny on Public Communications
What the Report Says
FINRA continues to heighten its oversight of firms’ advertising, social media, and sales practices, with a particular focus on:
- Retail investor protection—communications must present a balanced view of risks and benefits, especially when discussing complex products.
- Use of AI-generated or automated content—firms must maintain the same level of compliance oversight for AI-driven marketing as they do for human-created materials.
- Social media activity—registered representatives’ use of digital platforms is a major concern, with FINRA emphasizing stronger supervision policies for social media-based interactions with customers.
- Recordkeeping obligations—firms must ensure all communications comply with SEC Rule 17a-4, particularly in an increasingly digital environment.
How RegEd Supports Marketing Compliance
RegEd’s Advertising Review provides a streamlined submission, review, and approval workflow solution for marketing and sales materials, enabling compliance with FINRA’s latest guidelines.
Key Benefits:
- Automated, highly configurable workflow and audit trails, reducing regulatory risk.
- AI-powered content analysis, accelerating compliance reviews while maintaining transparency.
Proactive Compliance is the Best Strategy
The 2025 FINRA Annual Regulatory Oversight Report signals continued regulatory adaptation to industry changes, including AI adoption, vendor risk, and remote supervision. Compliance teams should expect FINRA to formalize guidance in these areas, making proactive compliance preparation essential.
RegEd remains committed to helping firms navigate these evolving regulatory expectations with technology and client-driven compliance solutions that enhance oversight, streamline workflows, and ensure regulatory adherence.
About RegEd
RegEd is the market-leading provider of RegTech enterprise solutions with relationships with more than 200 enterprise clients, including 80% of the top 25 financial services firms.
Established in 2000 by former regulators, the company is recognized for continuous regulatory technology innovation with solutions hallmarked by workflow-directed processes, data integration, regulatory intelligence, automated validations, business process automation and compliance dashboards. The aggregate drives the highest levels of operational efficiency and enables our clients to cost-effectively comply with regulations and continuously mitigate risk.
Trusted by the nation’s top financial services firms, RegEd’s proven, holistic approach to RegTech meets firms where they are on the compliance and risk management continuum, scaling as their needs evolve and amplifying the value proposition delivered to clients. For more information, please visit www.reged.com.
