FINRA’s head of enforcement’s speech yesterday at SIFMA AML was noteworthy.  Schroeder signaled a commitment by FINRA to avoid regulation by enforcement.  She said “(t)ransparency is particularly important in Enforcement. In order for the industry to be able to follow a rule, FINRA’s expectations have to be clear and rule violations have to be foreseeable. We want to avoid any perception of “rulemaking by enforcement.” That is why as we continue to integrate two enforcement teams, we are also thinking about our internal processes when we bring a case. In particular, we are considering how to identify any novel issues early, and ensure that we flag and discuss these issues with the rest of FINRA to develop the most effective regulatory response on behalf of the organization. Enforcement actions are one type of tool that FINRA can use to effect compliance. Other departments have other tools, and we want to make sure that we consult and collaborate early and often with our FINRA colleagues to consider issues holistically, and to think about the range of actions we might take, from an enforcement action to a Regulatory Notice or even a new rule.

Susan Schroeder’s SIFMA AML Remarks