May was a month defined by institutional transition, regulatory modernization, and an increasingly assertive posture from regulators navigating emerging market structures. At the SEC, a leadership change on the horizon raised practical questions about agency capacity, while public remarks from the Chairman and Commissioners reinforced a clear pivot toward innovation-friendly regulation and streamlined disclosure. FINRA continued its modernization agenda through its FINRA Forward initiative, publishing a year-in-review report and new margin guidance while signaling a more data-driven, transparent examination approach. The CFTC escalated its jurisdictional fight over prediction markets into active litigation against eight states — and moved aggressively in early June to establish a regulatory framework around 24/7 trading, perpetual contracts, and crypto-linked derivatives. At the state level, NASAA moved to modernize investment adviser advertising rules to align with federal standards, while state securities regulators continued to pursue enforcement actions targeting cybersecurity failures, branch supervision gaps, registration violations, and retail-facing digital asset fraud.
Early June activity reinforced these themes and added new ones. The SEC published a Risk Alert squarely focused on investment adviser conflicts of interest, disclosures, and fee practices. FINRA issued guidance on how its rules apply to personal services entities owned by registered representatives. Five federal agencies finalized joint data standards under the Financial Data Transparency Act. And the SEC proposed new overnight trading price protections under Regulation NMS. For compliance teams, the message is consistent: regulators are moving toward leaner, more targeted oversight frameworks while simultaneously raising expectations around supervisory controls, written policies, and demonstrable compliance processes. Firms need scalable, technology-enabled compliance programs to keep pace.
SEC Commissioner Peirce Announces Departure
Commissioner Hester Peirce announced she will leave the SEC in November 2026. Her departure may reduce the Commission to two sitting members unless others are confirmed to fill vacant seats prior to her departure. President Trump has not yet formally nominated candidates to fill existing open seats. Under the SEC’s Quorum Rule, two Commissioners can constitute a quorum, allowing operations to continue, including enforcement actions and rulemaking, but only if both remaining Commissioners agree. The practical implications are significant: any disagreement between the two remaining Commissioners could effectively stall agency action. Firms should be aware that regulatory output, including rulemaking timelines and enforcement priorities, may be affected by the Commission’s reduced capacity in the months ahead.
SEC Messaging Signals Continued Shift Toward Innovation and Streamlined Disclosure
SEC speech and public statement activity in May reflected a clear directional shift toward capital formation, innovation, and narrower disclosure mandates. Chairman Paul Atkins emphasized innovation-friendly regulation in remarks at the SCSP AI+ Expo and the Reagan National Economic Forum, promoted public-market reforms in a statement supporting proposed changes to filer-status and registered-offering rules, and issued a separate statement signaling caution and additional public input on novel exchange-traded funds (ETFs), including event-contract products. Commissioner Peirce’s conference remarks highlighted prediction markets, market innovation, and skepticism toward overly expansive regulation. Taken together, the month’s SEC messaging suggests a continued focus on easing public-company burdens, supporting market innovation, and reassessing recent disclosure-driven initiatives.
SEC Risk Alert: Investment Adviser Conflicts, Disclosures, and Fee Practices
On June 9, the SEC published a Risk Alert focused on investment adviser obligations related to economic conflicts of interest. The alert covers compliance programs, disclosures, fees and expenses, and whether advisers are calculating and charging advisory fees consistently with client disclosures. This is one of the most operationally specific compliance signals of the period for investment advisers, and it touches issues that routinely surface in SEC examinations: inadequate conflict identification, inconsistent fee billing, and gaps between what firms disclose and what they actually do.
For advisory firms, the Risk Alert is a clear prompt to review and pressure-test their compliance programs around conflicts identification, fee calculation methodologies, disclosure accuracy, and the policies and procedures that govern each. Firms with systematic conflicts management, fee oversight, and disclosure review processes — supported by documented evidence of compliance — will be better positioned to respond to examination inquiries grounded in this alert.
SEC Issued Orders Instituting Proceedings on Two FINRA Rule Proposals
The SEC issued orders instituting proceedings to determine whether to approve or disapprove proposed changes to two significant FINRA rules:
FINRA Rule 3290 (Outside Activities Requirements): On May 1, FINRA filed Amendment No. 1 to SR‑FINRA‑2026‑001 in a response to comments received on its proposed adoption of new Rule 3290 (Outside Activities Requirements), which would replace existing Rules 3270 and 3280. Amendment No. 1 provides clarification that when a broker-dealer permits outside activity engagement subject to conditions or limitations, the firm must reasonably supervise compliance with those conditions. In addition, it refines the ‘investment-related activity’ definition to explicitly include money services business within the definition’s examples and adds ‘but not limited to’ language intended to encompass activities pertaining to financial assets and other related roles or associations that are not expressly listed in the examples included within the definition. The comment period for Amendment No. 1 has ended. On June 11, FINRA responded to comments received in response to Amendment No. 1 addressing concerns raised within those comment letters. FINRA believes they have adequately addressed issues raised by commenters and they have determined not to amend the proposal further. We now wait for the SEC to approve or disapprove the rule proposal as amended.
FINRA Rule 2210 (Communications with the Public): The comment period ends June 26, with rebuttal comments due June 30. If adopted, the amendments would permit broker-dealers to project performance or provide targeted returns with respect to a security, securities portfolio, or an asset allocation or other investment strategy in its communications, subject to specified conditions. This would represent a significant shift in how broker-dealers can communicate about investment products and would have direct implications for advertising review processes and compliance with communications rules.
Firms with automated advertising review workflows and outside activity disclosure and approval systems will be better positioned to adapt quickly if either or both of these proposals are adopted.
FINRA 2026 Crypto Asset Activity Information Request
FINRA plans to publish the 2026 Crypto Asset Activity Information Request to member firms via the Firm Gateway on June 23. This survey is intended to inform FINRA of how the industry is engaging and adapting to crypto asset developments.
FINRA Guidance on Application of FINRA Rules in Relation to SEC No-Action Letter on Personal Services Entities (Regulatory Notice 26-12)
On June 9, FINRA issued Regulatory Notice 26-12 providing guidance on how FINRA rules apply in connection with the SEC no-action letter permitting registered representative-owned personal services entities (PSEs) to receive transaction-based compensation (TBC) without a broker-dealer registration (subject to conditions). The notice explicitly addresses the intersection of personal services entities with specific FINRA Rules. Broker-dealers wishing to pay TBC to PSEs need to evaluate their existing compliance programs, supervisory systems, compensation workflows and written policies and procedures and make appropriate modifications to address the conditions set forth in the SEC no-action letter.
SEC Proposes Amending Regulation NMS
On June 11, the SEC proposed amending Regulation NMS to rescind Rules 611 and 610(e) and related defined terms as well as other conforming changes. These amendments are deemed appropriate as the structure of the U.S. equity markets have evolved dramatically since these rules were adopted in 2005. Rescinding these rules would simplify market structure and reduce costs for market participants, allowing competition, innovation, and other market forces to shape the continuing evolution of equity markets. The comment period for this proposal ends August 17, 2026.
Prediction Markets: CFTC Escalates Jurisdictional Fight
Prediction markets and event contracts remain firmly in the regulatory spotlight. The CFTC is now engaged in active litigation against eight states — Arizona, Connecticut, Illinois, Minnesota, New Mexico, New York, Rhode Island and Wisconsin — over prediction market and event contract jurisdiction. The CFTC argues federal preemption under the Commodity Exchange Act (CEA). Minnesota’s law is the most aggressive, making operation of a prediction market a felony; if the state is ultimately permitted to enforce the ban, it would take effect August 1, 2026.
Adding context, the CFTC’s Director of the Division of Enforcement delivered a speech to NYU Law School addressing prediction market enforcement. For financial services firms, the jurisdictional uncertainty reinforces the importance of monitoring this space closely. In the absence of regulatory guidance, firms should consider whether participation in prediction markets or event contracts by associated persons may be considered a private securities transaction or an outside business activity depending on the particular activity of the associated person. It raises conflicts-of-interest considerations that firms should be prepared to evaluate and supervise. At a minimum, firms should consider addressing prediction markets in their policies and procedures.
CFTC Advances Digital Asset and Market Structure Framework
In early June, the CFTC issued a series of digital-asset and market-structure items that collectively represent one of the most significant regulatory framework developments for crypto-linked derivatives markets in recent months. These include an advisory on 24/7 trading, clearing, and settlement; a policy statement concerning the listing of perpetual contracts; and interpretive and no-action positions regarding certain crypto asset perpetuals and FCM transfers of customer crypto assets to foreign brokers as margin.
These items are directly relevant to futures commission merchants, designated contract markets, and firms operating in or considering entry into crypto-linked derivatives markets. Separately, the Digital Market Clarity Act continued to move through the legislative process, adding to the broader signal that digital asset regulatory frameworks are being built in real time across both agency rulemaking and congressional action.
For firms navigating this space, the combination of CFTC market structure guidance, state-level enforcement activity around tokenized and unregistered offerings (discussed below), and legislative movement reinforces the need for governance frameworks around emerging products — including policy updates, disclosures, supervisory controls, training, and surveillance-readiness support.
FINRA Forward: Modernizing the Examination Program
In its May 5 blog and podcast, How FINRA Is Enhancing Member Firm Examinations, FINRA outlined its modernization of the examination program under the FINRA Forward initiative. Key enhancements include streamlining initial examinations for lower-risk firms, extending exam cycles where appropriate, and using more targeted data requests supported by greater upfront data analysis to improve efficiency. FINRA is also providing firms with advance notice of exam timing and increasing transparency through earlier communication of scheduling and preliminary findings, while continuing to tailor exam scope based on firm-specific risk profiles. Looking ahead, FINRA emphasized the use of new technology and ongoing feedback mechanisms to further refine its approach.
For firms, FINRA’s data-driven, risk-informed examinations means that well-documented compliance programs — supported by digital audit trails, structured supervisory workflows, and centralized recordkeeping — will be increasingly important in demonstrating and defending a firm’s compliance posture during examinations.
FINRA Forward: A Year of Progress
FINRA published its FINRA Forward: A Year of Progress Report, highlighting actions taken since launching FINRA Forward in the spring of 2025 and looks ahead as we enter the initiative’s second year. The report highlights its rules modernization efforts including completed rule changes, new guidance, pending rule proposals, and future reforms. The report reflects among other things FINRA’s streamlining efforts and its reliance on technology and internal data analytics to inform data requests to its members and its broader regulatory shift toward more digitized, transparent, and efficient compliance practices, including data-driven supervision. For compliance teams, the report is a useful resource for identifying upcoming regulatory changes and assessing how current compliance processes align with FINRA’s evolving expectations.
FINRA Updates Margin Requirement Interpretations
FINRA published Regulatory Notice 26-11, updating interpretations of FINRA Rule 4210 (Margin Requirements) with guidance on the new intraday margin standards that became effective June 4, 2026. Firms should ensure that their policies, procedures, and training — including any Firm Element content addressing margin requirements — reflect the updated standards.
MSRB Increases Gift Limit Under Rule G-20
The MSRB amended Rule G-20 (Gifts and Gratuities), increasing the gift limit consistent with recent FINRA rule amendments. The changes became effective and operative June 1, 2026 for dealers that are FINRA members. The compliance date for all others is December 1, 2026. Firms with gifts and gratuities compliance programs should update their policies and monitoring thresholds accordingly to reflect the new limits.
State Enforcement Actions: Cybersecurity, Branch Supervision, Registration, and Digital Asset Fraud
Early June state securities enforcement activity delivered pointed reminders across several compliance domains. While these actions involve individual firms, the fact patterns are broadly instructive for compliance programs across the industry.
Montana: A Montana enforcement action cited failures involving personally identifiable client information, lack of written physical security and cybersecurity policies, lack of business continuity and succession procedures, misuse-of-information controls, privacy policy delivery failures, and inaccurate Form ADV updates. For investment advisers, this action is a clear reminder that regulators are examining not just whether cybersecurity and privacy policies exist, but whether they are written, current, and operationally implemented. Form ADV accuracy and business continuity planning also remain areas of active regulatory focus.
South Dakota: A consent order cited branch office supervision failures and failure to maintain current contact information and a valid email address, expressly connecting state violations to FINRA rules. For broker-dealers, this is a straightforward reminder that branch supervision and basic recordkeeping hygiene — including current contact information — remain enforcement priorities at the state level.
Oregon: A cease-and-desist order addressed unlicensed investment advisers and representatives; discretionary trading authority exercised without proper registration, commingling of client assets, and improper advisory and finder’s fees. This action reinforces the importance of registration oversight, custody and asset-handling controls, and fee governance for advisory firms.
Texas: Two emergency cease-and-desist orders targeted alleged cryptocurrency and tokenized real estate offerings involving fraud, misleading statements, unregistered securities, and multilevel marketing-style solicitation. These actions are strong indicators of continued state enforcement risk around retail-facing digital asset products and reinforce the need for firms to have controls around marketing review, suitability and best-interest obligations, and registered versus unregistered product governance.
Taken together, these enforcement actions support a clear message: firms that can demonstrate written policies, supervisory controls, training, and documented compliance processes across cybersecurity, branch oversight, registration, and emerging product governance are better positioned to withstand regulatory scrutiny — whether it comes from federal or state regulators.
AI Risk Moves Toward Financial Stability Oversight
Two developments in May underscored the accelerating convergence of artificial intelligence regulation and financial services oversight.
The U.S. Financial Stability Board signaled that AI risk is rapidly being reframed as a financial stability issue, not just a technology risk. The FSB’s involvement indicates that global coordination is underway, and gaps in measurement and oversight are already recognized. Firms should expect near-term regulatory evolution focused on risk measurement, vendor concentration, and the inclusion of AI in systemic risk monitoring frameworks.
Separately, Colorado repealed its 2024 AI Act before its June 30, 2026 effective date and replaced it with Senate Bill 26-189 which was signed into law on May 14, 2026. The new law takes a more industry-friendly approach, moving away from previous obligations like risk assessments and annual reviews and focusing instead on transparency and consumer rights. It directs the Colorado Attorney General to adopt rules establishing a state regulatory framework for AI systems used in financial decisions affecting consumers. Beginning January 1, 2027, developers and deployers of AI systems must provide certain disclosures and retain records about automated decision-making technology used in covered domains, including financial and lending services, insurance and access to benefits, employment, education, health care, real estate, and essential government services.
NASAA Modernizes Investment Adviser Advertising Model Rules
NASAA announced that its membership voted to adopt amendments to four model rules governing investment adviser advertising. The updates are intended to modernize state-level requirements and more closely align them with the current SEC Investment Adviser Marketing Rule. The approved amendments apply to the following NASAA Model Rules:
- Unethical Business Practices: Rule 102(a)(4)-1
- Prohibited Conduct: Model Rule USA 2002 502(b)
- Recordkeeping Requirements: Model Rule 203(a)-2
- Recordkeeping Requirements (USA 2002): Model Rule 411(c)-1
These are model rules, meaning individual states must still adopt them into their own statutes and regulations. Firms should monitor for state-by-state adoption activity, particularly if they manage advertising compliance across multiple jurisdictions. A systematic regulatory change management process that tracks model rule adoption at the state level can help firms stay ahead of an otherwise fragmented implementation timeline.
How RegEd Can Help
The breadth of regulatory activity in May and early June — spanning SEC risk alerts, FINRA rule proposals and guidance, CFTC market structure developments, multi-agency data standards, and state enforcement actions — underscores why compliance programs need to be both comprehensive and operationally efficient. Firms that rely on manual processes to track, interpret, and implement regulatory changes across federal and state jurisdictions face growing risk of gaps, delays, and documentation failures.
RegEd’s Regulatory Change Management solution continuously monitors, identifies, and analyzes regulatory changes across federal and state jurisdictions, with more than 40,000 regulatory items vetted annually by a team of regulatory experts with 450+ years of combined experience. Plain-language distillations, relevance filtering, and closed-loop task management ensure firms can move from awareness to implementation efficiently and with full documentation.
Complementary solutions — including advertising review automation, conflicts of interest monitoring, outside business activity and private securities transaction workflows, CE tracking, and Firm Element and Investment Adviser Representative Continuing Education content libraries — help firms operationalize regulatory requirements across the full compliance lifecycle. For investment advisers, RegEd’s compliance management capabilities support the kinds of conflicts oversight, disclosure governance, and policy-and-procedure documentation highlighted in the SEC’s June Risk Alert. For broker-dealers, supervisory workflow tools and books-and-records controls help address the branch supervision, compensation governance, and registered representative oversight themes reinforced by FINRA’s latest guidance and state enforcement actions.