Key takeaways from the 2026 FINRA Small Firm Conference

From clearing relationships and AI adoption to remote supervision and rule modernization, many of the topics on the table have direct implications for how small firms monitor trading and communications. In this article, Doug and Jon share their four key takeaways for surveillance teams, along with what they heard from firms away from the sessions.

1. Clearing firm reports aren't a substitute for your own trade surveillance

The clearing and introducing firm panel covered data access challenges during examinations and what to expect as FINRA considers rule changes to clarify responsibilities between the two.

Many small introducing firms rely on exception reports from their clearing firm to spot potential manipulation, but FINRA has already signalled the limits of that approach. As we covered in our review of the 2026 Annual Regulatory Oversight Report, the regulator expects firm-level oversight and holistic post-trade reviews for manipulative activity, not reliance on controls provided by others. Regulatory Notice 26-15, published in July, also sought input on introducing and receiving firm responsibilities for best execution.

With responsibilities potentially set to be redrawn, firms should map out:

• Which manipulation scenarios – spoofing, layering, wash trading, marking the close – their clearing firm covers
• Which scenarios they own themselves
• How they would access the underlying order data if an examiner asked

2. AI has to be explainable to be useful

AI featured heavily, with a pre-conference workshop and a dedicated panel, "AI in Practice: Balancing Efficiency and Risk," examining how firms supervise AI-assisted work and manage data, model and agentic risks.

For lean surveillance teams, AI-assisted alert triage offers a real way to cut false positives and keep pace with growing data volumes. However, the supervisory obligation doesn't transfer to the technology. Firms must be able to explain why an alert was closed, how a model was calibrated and tested, and who was accountable for the final decision. That expectation came up repeatedly in our conversations with delegates.

3. Remote supervision runs on surveillance evidence

The "From Location to Activity" panel explored calibrating inspection frequency by activity risk rather than location, and where physical inspection requirements intersect with growing reliance on technology-enabled surveillance. If fewer in-person inspections take place, the regulator will expect robust supervision to happen elsewhere. For remote representatives, trade surveillance records – which alerts fired, who reviewed them and what was escalated – become the evidence that supervision is working.

4. eComms is the early-warning system for Rule 3290 and fraud

Sessions on rule modernization and senior financial exploitation covered the proposed consolidation of outside business activity and private securities transaction rules under new Rule 3290, and FINRA's proposed Rule 2166 on temporary delays for suspected fraud, set out in Regulatory Notice 26-02. Undisclosed outside activity, selling away and exploitation often surface first in communications, so firms should review their eComms lexicons and models against the new framework once adopted.

What we heard from firms

Away from the sessions, a few themes kept coming up in our conversations with delegates:

• Small teams are doing a lot. Many small firms run compliance with one or two people, often alongside other roles. Surveillance has to fit around that, not add to it.
• Firms want fewer vendors. Every vendor brings its own due diligence, contract and ongoing oversight, which is a real burden for a lean team. Firms told us they'd rather have more of their compliance needs under one roof – best execution, trade surveillance, eComms surveillance and code of ethics – than manage a separate tool for each.
• Firms want AI to streamline, as long as it can be explained. Firms are looking at AI to take manual work off a small team's plate. The condition is that they can show an examiner why a decision was made and who signed off on it. A tool that saves time but can't explain itself just moves the risk.

Our concluding thoughts

Across the agenda, FINRA signalled more flexibility for small firms – remote inspections, a modernized rulebook, room to adopt AI – but expects firms to evidence that their supervision works. For trading and communications, that evidence is the surveillance record.

The challenge for small firms is producing that evidence without overloading a one- or two-person team. Before year-end, it's worth confirming who owns each manipulation scenario across your clearing relationship, documenting the controls around any AI used in alert review, and asking whether your current mix of vendors is reducing the burden or adding to it.

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