FINRA’s Latest Reg BI Fine Shows Why ‘Boilerplate’ Policies No Longer Work

By Janaya Moscony
SEC³ President
October 29, 2025 | SEC³ Compliance

Regulation Best Interest (Reg BI) was designed to elevate the standard of conduct for broker-dealers and their registered representatives. But nearly five years after its adoption, regulators are signaling that compliance cannot be achieved through minimal paperwork or vague assurances. FINRA’s recent enforcement actions make clear that firms must build a living, functional compliance structure—one that demonstrates ongoing supervision and accountability, not just written acknowledgment.

The latest case against Alexander Investment Services Co. provides a particularly instructive example of how regulators are recalibrating their expectations. It highlights that even smaller or mid-sized broker-dealers, without findings of customer harm, can still face penalties when their supervisory programs remain stuck in the era of boilerplate manuals and static compliance templates.

The Case at a Glance

According to FINRA’s Acceptance, Waiver and Consent (AWC), Alexander Investment Services recommended securities to retail customers from June 2020 through 2024 without maintaining written policies and procedures reasonably designed to achieve Reg BI compliance.

Although the firm’s manual referenced the duty to act in a customer’s best interest, it failed to explain how the firm would satisfy each of Reg BI’s component obligations—care, disclosure, conflict of interest, and compliance. The procedures did not include methods for identifying, escalating, or mitigating conflicts, nor did they specify supervisory testing or oversight responsibilities.

Even after revising its procedures in March 2024, FINRA found that Alexander’s updates were still too generic. They did not assign a responsible principal or define how compliance reviews would occur. The firm was censured, fined $25,000, and ordered to certify within 90 days that compliant policies and procedures were fully implemented. To read the Financial Industry Regulatory Authority’s Letter of Acceptance, Waiver and Consent, click here: inbox_view.aspx.

Why It Matters 

The Alexander Investment case marks an important evolution in enforcement philosophy. FINRA imposed penalties even though there were no findings of customer harm—a clear signal that procedural lapses alone can now constitute a violation. This represents a shift from reactive enforcement, where sanctions followed investor losses, to preventive enforcement, where inadequate systems themselves trigger liability.

For compliance professionals, the takeaway is that Reg BI has matured into a framework demanding verifiable governance. The rule expects firms to demonstrate not only that they understand the best interest standard, but that they have embedded it into daily supervision. Manuals that merely restate regulatory language without operational detail are now viewed as evidence of weak controls, not partial compliance.

FINRA’s emphasis on documentation and accountability mirrors broader SEC initiatives around “culture of compliance” and “effective supervision.” Firms that fail to connect policies with measurable actions risk regulatory findings even in the absence of misconduct.

What Broker-Dealers Should Take Away 

Firms must ensure their written supervisory procedures (WSPs) reflect how Reg BI functions in practice—who reviews what, how conflicts are mitigated, and how decisions are documented. Relying on pre-2020 templates or vendor-provided Reg BI sections is no longer sufficient.

Regulators are asking:
• Who owns the Reg BI process internally?
• How are conflicts tracked and resolved?
• How often are recommendations tested against suitability and disclosure records?

These questions underscore that Reg BI compliance is dynamic—it requires periodic reassessment and evidence of continuous oversight, not a one-time policy update.

How SEC³ Helps Firms Strengthen Reg BI Compliance

At SEC³ Compliance, we view this case as a timely warning for all broker-dealers. Our approach focuses on converting regulatory expectations into actionable, auditable systems that evolve with each new enforcement precedent.

We assist firms by:
• Reviewing written supervisory procedures for completeness and alignment with each Reg BI obligation.
• Conducting email reviews, mock audits, and supervisory testing that mirror FINRA examination methods.
• Performing AML, books-and-records, and branch reviews to ensure consistency across all aspects of the compliance framework.
• Designing and implementing conflicts-of-interest matrices that identify, document, and mitigate conflicts at both the firm and representative level.

Through these focused reviews, SEC³ helps firms bridge the gap between policy and practice—transforming written compliance into measurable supervision. Firms that modernize their compliance systems today will be far better positioned to avoid the reputational and financial consequences seen in the Alexander Investment matter.

To learn more or schedule a review of your compliance program, contact info@sec3compliance.com

Need assistance with your compliance program? SEC’s team of experienced compliance professionals can help. For more information, please email us at info@sec3compliance.com, call (212) 706-4029 x 214, or visit our website at www.sec3compliance.com.

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