FINRA's Reg BI Enforcement Wave Is Here: 134 Cases, 72% Surge, and the Supervisory Failures Driving Them

TL;DR

• FINRA brought 134 Regulation Best Interest enforcement actions in 2026, a 72% increase from 2025, and has committed to continuing this trajectory through its 2027 strategic plan
• The care obligation is the primary violation category — excessive trading, churning, and recommendations of complex products that make profitability difficult are where most cases originate
• Reid & Rudiger LLC was expelled from FINRA membership in June 2026 and its co-founders permanently barred for a six-year churning scheme that cost customers $2 million in commissions and $2.7 million in losses
• When reps violate Reg BI, the firm gets charged too — for supervisory failure — and firms whose written supervisory procedures don’t specifically describe how they operationalize the care obligation are the ones that fail

The pattern is clear enough now that “we’re monitoring the situation” isn’t a defensible posture anymore.

FINRA brought 134 Regulation Best Interest enforcement actions in 2026. That’s a 72% increase from 2025. The year isn’t over. The agency’s head of enforcement has said publicly that this trajectory is intentional — that stronger enforcement of Reg BI, suitability, and senior investor protections is baked into FINRA’s 2025–2027 strategic plan — and the 2026 numbers show the commitment translating into action.

If you run compliance for a broker-dealer and your Reg BI supervisory program hasn’t been pressure-tested recently, this is the data point that should change your calendar.

What 72% Growth in Enforcement Actually Looks Like

To put the 134 number in context: when Reg BI took effect in June 2020, FINRA brought a single enforcement action under the rule in 2022. The agency has been scaling up every year since, and 2026 represents a step change in that trajectory.

FINRA brought over 1,400 disciplinary actions total in 2026 and imposed approximately $95 million in fines across all categories. Reg BI cases now represent nearly 10% of all disciplinary actions — a significant share for a single rule that’s only six years old.

The majority of Reg BI cases involve individuals who violated the care obligation in their recommendations to retail customers. FINRA also brings corresponding supervisory failure charges against the member firms for failing to catch and address the violations. This is the double-exposure problem: a single churning case produces both an individual enforcement action and a firm enforcement action. The rep gets charged. The firm gets charged. The principal who missed the red flags gets charged too.

That last category is where compliance teams often underestimate their exposure. Three parties — individual, firm, and supervising principal — can all receive separate sanctions from a single client account with elevated trading activity.

The Care Obligation: What Violations Actually Look Like

FINRA’s head of enforcement has been explicit that the care obligation is the primary violation category in Reg BI cases. Understanding what care obligation failures look like operationally is where most supervisory programs need to improve.

Excessive Trading and Churning

The clearest care obligation violations involve accounts where the level of trading activity cannot be explained by an investment strategy that benefits the customer. FINRA uses turnover ratios (how many times the portfolio turned over annually) and cost-to-equity ratios (how much the portfolio needs to earn annually just to break even on commissions and costs) as primary analytical tools.

An account with an annual cost-to-equity ratio of 20% needs to generate 20% returns before the customer sees a dollar of profit. That’s an objective measure — and FINRA examiners pull it. If your surveillance doesn’t pull the same calculation, your supervisory program has a gap.

Complex Product Recommendations

FINRA has flagged non-traded REITs, structured notes, and leveraged ETFs as consistent problem areas in 2026 enforcement. One firm was the subject of an enforcement action for recommending these products to retail customers between 2022 and 2025 without adequate suitability documentation or supervisory review.

The issues with complex products tend to cluster around the same three failures: the rep recommends a product whose risk and liquidity profile doesn’t match the customer’s circumstances; the firm doesn’t have a supervisory review process for complex product recommendations that’s any more rigorous than standard recommendations; and neither the rep nor the principal can produce documentation of why the product was appropriate for this specific customer.

The JK Financial Case

Earlier in 2026, FINRA fined JK Financial $65,000 for failures spanning multiple categories: Reg BI compliance policies that failed to describe procedures for achieving care obligation compliance, Form CRS recordkeeping failures, and email recordkeeping failures. What’s notable about this case isn’t the dollar amount — it’s the finding that the firm’s policies existed but were inadequate because they didn’t describe how the firm would actually operationalize care obligation review.

That’s the standard FINRA is applying: policies that say the firm will comply with Reg BI aren’t enough. Policies must describe how.

The Reid & Rudiger Expulsion: A Case Study in What Happens When Supervision Fails

On June 17, 2026, FINRA expelled Reid & Rudiger LLC from membership and permanently barred co-founders Clifford Reid and Edward Rudiger, Jr. from association with any member firm. The finding: churning and excessive trading in 20 customer accounts over six years, using a high-volume, high-cost market-timing strategy that made it virtually impossible for customers to make a profit.

The scheme cost customers $2 million in commissions and other trading costs, and resulted in approximately $2.7 million in trading losses. The care obligation was violated for each recommendation in a strategy that was designed — from its structure — to benefit the reps rather than the customers.

FINRA also suspended the firm’s two supervisors, Marc Harrison and Kelli Mezzatesta, for three months in all principal capacities for failing to identify and investigate red flags related to Reid’s and Rudiger’s pervasive misconduct.

Three distinct enforcement outcomes from one case:

• Individual reps: expelled and permanently barred
• The firm: expelled
• The supervisors: suspended three months

This is the multiplier effect of supervisory failure. When the underlying conduct spans six years, the question isn’t why the misconduct happened — it’s why the supervisory system ran for six years without flagging elevated turnover ratios, high cost-to-equity ratios, or customer complaints in those 20 accounts.

The answer, in cases like this, is almost always the same: surveillance existed but wasn’t operationalized. Exception reports were generated but not reviewed by principals who understood what they were looking at. Or worse — the reports didn’t pull the metrics that would have made the pattern visible.

What FINRA Is Looking for in Supervisory Programs

When FINRA examines a broker-dealer’s Reg BI compliance, the examination has shifted from evaluating whether the firm has written policies to evaluating whether those policies are operational. That’s a different question, and it produces different findings.

Written Supervisory Procedures That Describe How

FINRA has made clear that written supervisory procedures (WSPs) that simply state the firm will comply with Reg BI don’t meet the standard. WSPs must describe the firm’s specific procedures for achieving compliance with the care obligation, the conflict of interest obligation, and the disclosure obligation.

For the care obligation, this means describing: how the firm defines “best interest” for purposes of its product recommendations; what documentation the rep must produce to support a recommendation; what the supervisory review process looks like for complex product recommendations; and what thresholds trigger escalation to a principal for review.

A firm with WSPs that reference the Reg BI rule without describing the firm’s actual process is exposed — even before the first client complaint.

Surveillance That Pulls the Right Metrics

Reg BI supervisory surveillance needs to pull turnover ratios and cost-to-equity ratios by account, at a frequency that would catch patterns before they become six-year schemes. For complex products, surveillance should also flag concentration — accounts where a disproportionate share of assets is concentrated in a single illiquid or high-cost product category.

The principals reviewing surveillance exception reports need to understand what they’re looking at. In too many firms, exception reports are generated and routed to a principal who doesn’t have the analytical background to interpret what an elevated turnover ratio means for a customer’s financial position. FINRA evaluates whether the reviewer understood the metric — not just whether the metric was calculated.

Principal Review for Complex Products

Complex product recommendations — non-traded REITs, structured notes, leveraged ETFs, options — should require a supervisory review that’s distinct from standard equity recommendations. The review should include: customer investment profile documentation, an explicit analysis of why the product is appropriate for this customer at this time, and a record that the review happened.

Firms that treat complex product recommendations with the same supervisory workflow as vanilla equity trades are creating exactly the gap that FINRA is finding in 2026 enforcement.

The Control Self-Assessment Question

If you’re doing an honest assessment of your Reg BI supervisory program right now, these are the questions that will tell you where the gaps are:

Do your WSPs describe how the firm operationalizes the care obligation — not just that it will comply?

Does your surveillance pull cost-to-equity ratios and turnover ratios by account, on a schedule that would catch patterns before they persist for years?

Do the principals reviewing surveillance exception reports have the analytical training to interpret what elevated ratios mean for a customer’s financial position?

Is there a documented escalation path when surveillance flags a potential care obligation issue — with timelines and assigned responsibility?

Do complex product recommendations require a distinct supervisory review with customer-specific documentation?

If the answer to any of these is “I’m not sure” or “that depends on who’s looking,” those are the gaps FINRA will find first. The RCSA (Risk & Control Self-Assessment) is designed to surface exactly this kind of operational control gap — whether a control exists on paper versus whether it’s functioning in practice.

What Happens When FINRA Finds the Gaps

The Reid & Rudiger case is the extreme outcome. Most firms don’t face expulsion. But the enforcement pattern in 2026 shows what the more common outcomes look like:

• Firms with inadequate WSPs receive findings requiring remediation of specific procedures, plus fines
• Firms where supervisors missed red flags receive suspended principal sanctions alongside any individual rep sanctions
• Firms with systemic surveillance gaps receive orders requiring system upgrades within a defined timeframe, plus third-party review of remediation

The trajectory is clear. A firm that gets examined in 2027 with a supervisory program that hasn’t been updated since Reg BI’s effective date in 2020 will face a very different examination experience than a firm that has operationalized the rule into surveillance, training, and escalation procedures.

FINRA’s 2026 Regulatory Oversight Report flagged Reg BI supervisory program gaps as a priority examination area for the year. The 134 enforcement actions are the follow-through.

The CCO personal liability framework is equally relevant here: when FINRA brings a supervisory failure charge against a firm, the compliance officer at the center of a supervisory failure — especially one who held principal authority — is exposed. The CCO case and the Reg BI supervisory failure case aren’t separate categories of enforcement. They connect.

The Practical Checklist

Before the next exam cycle, here’s where to focus supervisory program review:

1. Read your WSPs with the question: “If a FINRA examiner asked how we operationalize the care obligation, can these procedures answer that question?” If not, they need to be rewritten.

2. Pull your surveillance exception reports for the last 12 months. Are cost-to-equity ratios and turnover ratios present? Are they being reviewed by principals who can explain what they mean?

3. Identify your complex product supervisory workflow. Is it distinct from standard equity recommendations? Does it produce a reviewable record?

4. Check your principal coverage. Are supervisors who receive Reg BI-related surveillance reports trained to interpret them and escalate?

5. Review recent FINRA enforcement actions in your product categories — particularly the FINRA CAT Instinet enforcement action and any actions involving firms with similar product mixes to yours.

134 Reg BI actions in one year from a regulator that started with one. The trajectory is the signal. Supervisory programs that were adequate in 2022 need to be re-evaluated against what FINRA is actually finding in 2026 — because “we have policies” is no longer the answer they’re looking for.

Sources:

• FINRA Expels Reid & Rudiger, Bars Cofounders — FINRA, June 17, 2026
• Reg BI Cases Tick Up at FINRA’s Enforcement Division — AdvisorHub
• 2026 FINRA Enforcement Recap: Major Actions and Fines
• Increase Reported in FINRA Enforcement Cases Over Regulation BI Violations — Hyman Cotter PC
• SEC Regulation Best Interest (Reg BI) — FINRA.org