Broker-Dealer Compliance: What You Need to Cover

Running a compliant broker-dealer operation in today's regulatory environment requires systematic attention across a wide range of obligations. Whether you are a compliance officer at a large firm or managing compliance at a smaller registered entity, this checklist covers the foundational areas that regulators — including FINRA, the SEC, and state securities regulators — examine most closely.

1. Registration and Licensing

  • Confirm firm registration is current with the SEC (Form BD) and all applicable states.
  • Ensure all registered representatives hold appropriate FINRA licenses (Series 7, 63, 65, 66, etc.) for the activities they perform.
  • Review fingerprint and background check procedures for new hires.
  • Confirm principal registrations (Series 24, 9/10, 4, etc.) are in place for supervisory personnel.

2. Written Supervisory Procedures (WSPs)

WSPs are the backbone of broker-dealer compliance. Regulators treat outdated or vague WSPs as a significant red flag.

  • Review and update WSPs at least annually and whenever a rule change occurs.
  • Ensure WSPs address every business line and product type the firm offers.
  • Document supervisory reviews actually conducted — evidence of supervision is as important as the procedures themselves.

3. Best Execution

FINRA Rule 5310 and SEC guidance require firms to seek the most favorable terms reasonably available for customer orders.

  • Conduct quarterly reviews of order routing practices for each security type and market.
  • Document the factors considered in venue selection decisions.
  • Review payment for order flow (PFOF) arrangements for conflicts of interest and disclosure compliance.

4. Recordkeeping

SEC Rules 17a-3 and 17a-4 set out specific recordkeeping requirements for broker-dealers. Non-compliance in this area has led to significant enforcement actions in recent years, particularly around electronic communications.

  • Retain required records for the mandated periods (3 years for most, 6 years for certain records, with the first 2 years in an easily accessible location).
  • Capture and archive all business-related communications, including those on personal devices and third-party messaging platforms (WhatsApp, Signal, etc.).
  • Ensure records are stored in a non-rewriteable, non-erasable format (WORM compliance).

5. Anti-Money Laundering (AML)

  • Maintain and implement a written AML program tailored to the firm's business model.
  • Conduct annual independent testing of the AML program.
  • Designate a qualified AML compliance officer.
  • Provide AML training to all relevant employees at least annually.
  • File Suspicious Activity Reports (SARs) within required timeframes.

6. Regulation Best Interest (Reg BI)

For firms making recommendations to retail customers:

  • Maintain and deliver Form CRS (Customer Relationship Summary) to new and prospective retail customers.
  • Conduct product-level reviews to ensure recommendations are in retail customers' best interest.
  • Document how conflicts of interest are identified, mitigated, and disclosed.

7. Financial Reporting and Net Capital

  • Monitor net capital levels daily and maintain required minimums under SEC Rule 15c3-1.
  • File FOCUS reports (Financial and Operational Combined Uniform Single) on schedule with FINRA.
  • Maintain a current reserve formula computation under Rule 15c3-3 (customer protection rule) where applicable.

8. Continuing Education

  • Ensure all registered persons complete the annual Regulatory Element of FINRA's continuing education program.
  • Administer the firm's own Firm Element training program based on a needs analysis conducted each year.

Final Note

This checklist is a starting point, not an exhaustive catalog. Regulatory requirements vary based on firm size, business lines, customer types, and product mix. Compliance teams should supplement this with legal counsel and stay current with FINRA regulatory notices and SEC guidance as rules evolve.