November 10, 2026.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) ^[1] and Rule 19b-4 thereunder,^[2] notice is hereby given that on November 2, 2026, the Financial Industry Regulatory Authority, Inc. (“FINRA”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by FINRA. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

FINRA is proposing to (1) amend the By-Laws of the Corporation (“FINRA By-Laws”), the By-Laws of FINRA Regulation, Inc. (“FINRA Regulation By-Laws”) and the Plan of Allocation and Delegation of Functions by FINRA to Subsidiaries (“Delegation Plan”) to revise FINRA's governance structure, including the composition and operation of the Board of Governors of ( printed page 73299) FINRA (“FINRA Board” or “Board”) and committees established by the Board comprising solely Governors (“Board committees”); and (2) amend FINRA's Restated Certificate of Incorporation (“Certificate of Incorporation”) to conform relevant provisions to the amended and restated FINRA By-Laws. The proposed rule change also would make technical and conforming changes to the FINRA By-Laws, FINRA Regulation By-Laws, Delegation Plan, Certificate of Incorporation and FINRA rules.

The text of the proposed rule change is available on FINRA's website at www.finra.org and at the principal office of FINRA.

II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

1. Purpose

Background

The FINRA By-Laws, read together with the Certificate of Incorporation, govern the composition and operation of the FINRA Board. The Board includes individuals from member firms of various sizes and business models, as well as public leaders with expertise in markets, technology, regulatory oversight, business and law. In 1996, FINRA's predecessor, the National Association of Securities Dealers (“NASD”), amended its By-Laws to require that the number of non-industry Governors exceed the number of industry Governors.^[3] The majority public structure was implemented when the By-Laws were last amended in 2007 in connection with the merger of NASD and NYSE Regulation to create FINRA.^[4]

The FINRA By-Laws currently provide for a Board composed of up to 25 Governors, with 10 seats designated for “Industry Governors,” ^[5] 11 to 14 seats designated for “Public Governors” ^[6] and one seat reserved for FINRA's Chief Executive Officer (“CEO”), who is considered neither an Industry Governor nor a Public Governor.

Seven of the Industry Governor seats—three Small Firm Governors, one Mid-Size Firm Governor and three Large Firm Governors—are designated for individuals associated with FINRA members that correspond to each firm size. Pursuant to the FINRA By-Laws, a small firm employs at least one and no more than 150 registered persons; a mid-size firm employs at least 151 and no more than 499 registered persons; and a large firm employs 500 or more registered persons. ( See FINRA By-Laws Article I.) Industry Governors are elected to these seats by the small, mid-size and large member firms, respectively. The three remaining Industry Governor seats are appointed, segment-specific seats, i.e., a “Floor Member Governor,” an “Independent Dealer/Insurance Affiliate Governor” and an “Investment Company Affiliate Governor,” as those terms are defined in the FINRA By-Laws. ( See FINRA By-Laws Article I.)

Overview of Proposed Amendments

FINRA is proposing to amend the FINRA By-Laws, FINRA Regulation By-Laws and Delegation Plan relating to the composition and operation of the FINRA Board and Board committees to modernize FINRA's governance structure and strengthen FINRA's self-regulatory model. As described below, FINRA is further proposing to amend the Certificate of Incorporation to conform relevant provisions to the amended and restated FINRA By-Laws and to make other updates and technical changes.

Among other changes, the proposed rule change would transition the FINRA Board from a majority of Public Governors to a majority of Industry Governors, while preserving a substantial role for public representatives on the Board—Public Governors would represent from 41.7 to 47.4 percent of the total number of Industry and Public Governors.^[7] The proposed rule change also would potentially broaden industry representation, including among small firms, on the FINRA Board by converting the three appointed, segment-specific industry seats to three appointed, at-large industry seats. And, consistent with modern governance practices, the proposed rule change would reduce the size of the Board, which currently may have up to 25 members, to no more than 20 members.

With respect to the operation of the FINRA Board and Board committees, the proposed rule change would revise term limits, conform quorum requirements and provide more flexibility for the Board to manage the composition of the Board and its committees based on current needs, subject to minimum Industry and Public Governor representation requirements. The Audit Committee would continue to require a majority of Public Governors and continue to be chaired by a Public Governor, as is the case today.

FINRA believes that the proposed rule change would strengthen member engagement, increase access to industry expertise and better position FINRA to protect and serve investors, markets and member firms in an evolving industry and market environment. FINRA believes that the public benefits of the self-regulatory organization (“SRO”) model include the ability to leverage member knowledge, experience and insight. Appropriate member participation in FINRA's programs is important for capturing the deep, practical expertise that is central to self-regulation and helps FINRA effectively ( printed page 73300) carry out its mission of protecting investors and market integrity—including by producing better visibility into emerging threats, risky business practices and unfair tactics. In addition, the proposed rule change would provide the Board greater flexibility to draw on expertise from a broader range of business models to adapt to changes in the industry and ensure appropriate representation from across the membership—enhancing opportunities for a wider spectrum of member firms, including more small firms, to participate in governance. Finally, with a somewhat smaller size and greater flexibility to manage its operations, the Board would be more nimble and better able to benefit from the insights of both Industry and Public Governors.

FINRA notes that several of the factors that supported NASD's adoption of a majority non-industry Board over 30 years ago are significantly different from the environment FINRA faces today. NASD's change to its Board composition was one of many changes made in connection with an SEC enforcement action against NASD, which found that NASD failed to adequately oversee the Nasdaq market and that Nasdaq market makers exercised undue influence over NASD's operations and regulatory affairs.^[8]

NASD fully divested Nasdaq in 2006, eliminating the market-driven conflicts of interest that had previously existed between NASD's self-regulatory obligations and the competitive incentives of Nasdaq market makers.^[9] And FINRA has a number of important institutional safeguards in place to ensure that it serves its mission of protecting investors and market integrity. These include, in addition to substantial Public Governor involvement, organizational guardrails, procedural requirements and other checks and balances to provide for robust and fair regulatory and disciplinary functions, and greater transparency into FINRA's regulatory operations, rulemaking and finances to facilitate accountability.

More specifically, FINRA maintains a fully independent internal audit staff, which reviews all aspects of FINRA and its subsidiaries and reports directly to what will continue to be a majority public, Public Governor-chaired Audit Committee.^[10] In addition, FINRA's Office of the Ombuds provides an independent, neutral and confidential source of assistance for individuals who have questions or concerns about the activities of FINRA and its employees. FINRA's ombuds staff also reports directly to the Audit Committee.^[11] This structure ensures that the Audit Committee can investigate issues of concern.^[12]

To ensure independence in disciplinary functions, FINRA's Office of Hearing Officers (“OHO”) serves as FINRA's adjudicatory forum for disciplinary and expedited proceedings. OHO is an independent office within FINRA that employs impartial professional Hearing Officers who preside over proceedings commenced by FINRA's Enforcement Department. OHO maintains strict independence from FINRA's regulatory and enforcement programs, and Hearing Officers are not involved in the investigative and examination processes of FINRA. Employment protections exist for Hearing Officers to further ensure their independence, and any termination by FINRA's CEO can be appealed to the Audit Committee.^[13]

In addition, FINRA's Office of Disciplinary Affairs (“ODA”), which is independent of Enforcement and not involved in the investigation or litigation of cases, is charged with reviewing proposed settlements and complaints. ODA provides an independent review of the legal and evidentiary sufficiency of charges proposed by the Enforcement staff. ODA also reviews settlements for consistency with FINRA's Sanction Guidelines and applicable precedent.^[14]

In furtherance of FINRA's mission to protect investors, FINRA's Investor Education Foundation provides educational programs and supports innovative research to protect investors and help them achieve their financial goals.^[15]

FINRA also produces regular reports on its activities and finances, with publicly available reports on its budget and financial performance. All FINRA rule changes are subject to public review and comment, and FINRA disciplinary actions are made public. FINRA also produces regular information about its examination program and broader regulatory operations, including insights into findings from those operations.^[16]

FINRA believes that these safeguards, among others, along with comprehensive SEC oversight and evaluation of such oversight by the Government Accountability Office (“GAO”),^[17] provide strong assurance that FINRA will continue to perform its investor protection responsibilities while benefiting from the revised governance structure and strengthened self-regulatory model that the proposed rule change provides.

Proposed Amendments Relating to the FINRA Board

FINRA is proposing to amend the FINRA By-Laws with respect to the composition and operation of the FINRA Board as follows.

First, the proposed rule change would amend the FINRA By-Laws to require that the Board have a majority of Industry Governors. ( See FINRA By-Laws Article VII, Section 4(a).) The minimum number of Industry Governors would be the seven existing ( printed page 73301) elected Industry Governor seats. The number of Public Governors would be required to be one or two less than the number of Industry Governors, meaning that at least 41.7 percent of Industry and Public Governors would be Public Governors. FINRA's CEO would remain on the Board in a seat that is neither Industry nor Public.

Second, the proposed rule change would amend the FINRA By-Laws to convert the three appointed Industry Governor seats (as noted above, these are the Floor Member Governor, the Independent Dealer/Insurance Affiliate Governor and the Investment Company Affiliate Governor) to appointed At Large Industry Governor seats. ( See FINRA By-Laws Article VII, Section 4(a).) An “At Large Industry Governor” would be defined as a “member of the Board to be appointed by the Board; provided however, to be eligible to serve, an At Large Industry Governor must qualify as an Industry Governor.” ( See FINRA By-Laws Article I.) The number of At Large Industry Governor seats would not exceed three.^[18]

The FINRA Board would have flexibility to fill these seats based on the needs of FINRA by drawing from the expertise, experience and business models of the entire membership. In addition, the Board would be able to decide whether to further decrease its overall size by reducing the number of At Large Industry Governor seats. In such instance, the Board also would decrease the number of Public Governor seats to maintain the Industry Governor majority. In all scenarios, the total number of Public Governors on the Board would be one or two less than the total number of Industry Governors on the Board, thereby preserving substantial Public Governor participation in Board governance, as illustrated in greater detail below.

Third, the proposed rule change would reduce the total number of seats on the Board to a maximum of 20, comprising: (1) seven to 10 Industry Governors (seven elected Industry Governors, i.e., three Small Firm Governors, one Mid-Size Firm Governor and three Large Firm Governors, and zero to three appointed At Large Industry Governors (as determined by the Board)); (2) five to nine Public Governors (as determined by the Board, always one or two less than the total number of Industry Governors); and (3) FINRA's CEO. As amended, Article VII, Section 4(a) of the FINRA By-Laws would provide that the FINRA Board shall consist of no fewer than 13 nor more than 20 Governors.

As noted, the proposed rule change provides for substantial continued public representation on the Board, with Public Governors comprising at least 41.7 percent of the total number of Industry and Public Governors. For example, if the Board has the minimum number of Industry Governors, i.e., the seven elected Industry Governor seats, then the number of Public Governors can be no less than five and no more than six. If there are five Public Governors ( i.e., two less than the number of Industry Governors), then the Public Governors would comprise 41.7 percent of the total number of Industry and Public Governors. If there are six Public Governors ( i.e., one less than the number of Industry Governors), then the Public Governors would comprise 46.2 percent.

If the Board has the maximum number of Industry Governors, i.e., the seven elected Industry Governor seats and the three appointed At Large Industry Governor seats, then the number of Public Governors can be no less than eight and no more than nine. If there are eight Public Governors ( i.e., two less than the number of Industry Governors), then the Public Governors would comprise 44.4 percent of the total number of Industry and Public Governors. If there are nine Public Governors ( i.e., one less than the number of Industry Governors), then the Public Governors would comprise 47.4 percent.^[19]

Fourth, the proposed rule change would amend the FINRA By-laws to revise the quorum requirements to reflect the changes to the Board's composition. Specifically, a majority of the Board, including not less than 50 percent of the Public Governor members (which is currently required) and 50 percent of the Industry Governor members (which would be a new requirement) would be needed to constitute a quorum of the Board. ( See FINRA By-Laws Article VII, Section 8.)

Finally, the proposed rule change would amend the FINRA By-Laws to extend the current Board term limits from two consecutive three-year terms to three consecutive three-year terms. ( See FINRA By-Laws Article VII, Section 5.) This would provide the possibility that Governors could serve for up to nine years (versus six years currently).^[20] Section 5 would also be amended to clarify that any appointed or elected Governor who fills a vacancy of a Governor position or a new Governor position shall serve for the remaining term of the class ^[21] or until a successor is duly appointed and qualified, or until death, resignation, disqualification or removal.

Proposed Amendments Relating to the FINRA Board Committees

The FINRA By-Laws provide for the following Board committees: the Nominating Committee,^[22] Executive Committee, Audit Committee ^[23] and Finance Committee.^[24] ( See FINRA By-Laws Article VII, Section 9, and Article IX, Sections 4, 5 and 6, respectively.) The FINRA By-Laws also provide generally for any other committee or subcommittee appointed by the Board. ( See FINRA By-Laws Article IX, Section 1(b).) Additional Board committees are provided for under the FINRA Regulation By-Laws (specifically, the FINRA Regulation Board of Directors (“FINRA Regulation Board”) ^[25] under Article IV) and the Delegation Plan (specifically, the Management Compensation Committee (“Compensation Committee”) ^[26] under Section I.C.).^[27] FINRA is proposing to modify composition and other requirements for the Board committees and subcommittees as follows.

First, the proposed rule change would amend the FINRA By-Laws to establish ( printed page 73302) minimum composition requirements for Board committees, as set out below. Subject to these requirements, other Board committee governance requirements ( e.g., number and composition of committee members and Chair designation) would be established by the Board in the committees' respective governing documents. This would provide the Board with greater discretion to establish and modify, as needed, the size, composition and leadership of its committees to best suit FINRA's circumstances and governance needs.

As noted above, the Audit Committee would continue to have a majority of Public Governors and be chaired by a Public Governor. Specifically, the amended and restated FINRA By-Laws would provide that the Audit Committee “shall include a number of Public Governors as members thereof in excess of the number of Industry Governors which are members thereof” and retain the requirement that a Public Governor serve as Chair of the Committee. ( See FINRA By-Laws Article IX, Section 5(a).) This would ensure that the FINRA Board would continue to have an appropriately constituted committee to review any alleged concerns arising from FINRA's conduct or from industry participation in FINRA's governance and oversight of member firms. FINRA is proposing to delete the requirement that the Audit Committee consist of four or five Governors to provide the Board flexibility to determine the appropriate size of the Audit Committee, consistent with other Board committees. FINRA officers and employees would continue to be prohibited from being members of the Audit Committee. ( See FINRA By-Laws Article IX, Section 5(a).)

For all other Board committees, the proposed rule change would delete requirements in the FINRA By-Laws relating to the size of any given committee and require that each Board committee have (1) at least two Public Governors and at least two Industry Governors; and (2) a minimum number of Public Governors that is one or two less than the number of Industry Governors, depending on the size of the committee.^[28] ( See FINRA By-Laws Article VII, Section 9(b) (relating to the Nominating Committee), Article IX, Section 1(b) (relating to Board committees and subcommittees generally), Article IX, Section 4(b) (relating to the Executive Committee) and Article IX, Section 6(b) (relating to the Finance Committee).) The first requirement would ensure a minimum representation of both Industry and Public Governors on each Board committee. The second requirement would ensure that Public Governors continue to have meaningful representation on each Board committee.

Thus, except for the Audit Committee—which must be majority public and have a public Chair—the Board could choose to appoint a committee with a majority of Public Governors, a majority of Industry Governors, or an equal number of Public and Industry Governors, based on the needs of FINRA at the time, e.g., the expertise of particular Governors. Similarly, the Board could choose a committee Chair who is a Public Governor or an Industry Governor.

The proposed rule change would make conforming amendments to the FINRA Regulation By-Laws relating to the FINRA Regulation Board. Specifically, the FINRA Regulation Board must have at least two Public Directors and at least two Industry Directors and, depending on its size, must have a minimum number of Public Directors that is one or two less than the number of Industry Directors. ( See FINRA Regulation By-Laws Article IV, Section 4.3(a).)

In addition, FINRA is proposing to delete the requirement that the FINRA Regulation Board consist of no fewer than five and no more than 17 Directors to provide the FINRA Board flexibility to determine the appropriate number of Directors based on FINRA's needs.^[29] ( See FINRA Regulation By-Laws Article IV, Section 4.2.) FINRA's CEO and the Chair of the FINRA Board would continue to serve as ex-officio non-voting members of the FINRA Regulation Board. ( See FINRA Regulation By-Laws Article IV, Section 4.3.)

FINRA notes that the FINRA Regulation By-Laws also require that at least two and not less than 20 percent of the members of the FINRA Regulation Board be elected Governors, i.e., Small Firm, Mid-Size Firm or Large Firm Governors.^[30] The proposed rule change would not modify this provision.

Second, the proposed rule change would amend the FINRA By-Laws to remove the one-year term limits that currently exist for certain Board committees ^[31] and adopt a new provision, consistent with Delaware law and current governance practices, expressly authorizing the FINRA Board to appoint committee members for such terms as the Board deems advisable. Specifically, proposed FINRA By-Laws Article IX, Section 8 would provide that committee and subcommittee members shall hold office for such term as may be determined by the Board and until a successor is duly appointed, or until such member's earlier death, resignation, disqualification or removal.^[32] In addition, the proposed rule change would adopt FINRA By-Laws Article IX, Section 3(b) to authorize the Board, in addition to appointing committee members for such terms as the Board deems advisable, to review the composition of the committees and subcommittees and change the membership of the committees and subcommittees from time to time as the Board deems advisable.^[33] Consistent with its current practice, the FINRA Board intends to ( printed page 73303) review committee membership on an annual basis.

Third, the proposed rule change would amend the quorum requirements under the FINRA By-Laws to reflect the increased industry representation on the Board committees and create a simplified uniform requirement. Specifically, the current committee-specific quorum requirements ^[34] would be deleted, and pursuant to proposed FINRA By-Laws Article IX, Section 7, a quorum would consist of a majority of the committee (or subcommittee, as applicable), including not less than 50 percent of the Public Governor members (which is currently required) and not less than 50 percent of the Industry Governor members (which would be a new requirement).

Conforming amendments relating to the quorum requirements for the FINRA Regulation Board would be made to Article IV, Section 4.9 of the FINRA Regulation By-Laws.^[35] This Section would also be amended to clarify that the ex-officio non-voting members of the FINRA Regulation Board do not count for purposes of determining quorum or whether a majority vote has been obtained.^[36]

Fourth, the proposed rule change would amend the FINRA By-Laws to provide expressly that the Nominating Committee, Audit Committee and Finance Committee shall exercise any such other powers and duties, and perform such other functions, as may be authorized by the Board. ( See proposed FINRA By-Laws Article VII, Section 16, and amended Article IX, Section 5(b) and Article IX, Section 6(a), respectively.)

Finally, the proposed rule change would delete Section I.C. (Management Compensation Committee) of the Delegation Plan in its entirety.^[37] This committee, which is the only Board committee established in the Delegation Plan, would be governed by the general provisions of the FINRA By-Laws applicable to other committees appointed by the FINRA Board pursuant to Article IX, Section 1(b).

Comparison of Current and Proposed Requirements

The following chart summarizes the current and proposed composition, quorum and term requirements relating to the FINRA Board and Board committees. The following is only a summary; the text of the proposed rule change is [provided in] Exhibit 5.[^[38] ]

Proposed Amendments Consistent With Delaware Law

FINRA is proposing additional amendments to update and clarify the FINRA By-Laws and FINRA Regulation By-Laws consistent with Delaware law. The proposed rule change would:

• update the FINRA By-Laws to expressly allow the Chair of any meeting of FINRA's members to convene, recess or adjourn the meeting, which is a common feature of the by-laws of Delaware corporations (see FINRA By-Laws Article XXI);
• update the provisions relating to conflicts of interest to reflect updates to Section 144 of the Delaware General Corporation Law, which was overhauled in 2025 (see FINRA By-Laws Article XV, Section 4, and FINRA Regulation By-Laws Article IV, Section 4.14(b)); ^[39]
• update the provision in the FINRA By-Laws relating to the removal of FINRA officers, as permitted by Delaware law and common practice for Delaware corporations, to provide additional flexibility for removal by a duly authorized officer or an officer who appointed the officer (see FINRA By-Laws Article VIII, Section 6(b));
• clarify and harmonize provisions in the FINRA Regulation By-Laws governing the voting standard required for the FINRA Regulation Board to remove officers (see FINRA Regulation By-Laws Article VII, Section 7.1); ^[40]
• incorporate references in the FINRA Regulation By-Laws to the statutory requirement that actions taken by the stockholder of FINRA Regulation without a meeting be delivered to FINRA Regulation (see FINRA Regulation By-Laws Article III, Section 3.1);
• update and harmonize provisions in the FINRA Regulation By-Laws relating to the removal, resignation and disqualification of Directors,^[41] and the ( printed page 73306) filling of vacancies and newly-created directorships in a manner consistent with applicable provisions of Delaware law ( see FINRA Regulation By-Laws Article IV, Sections 4.6, 4.7 and 4.8); ^[42]
• update and clarify provisions in the FINRA Regulation By-Laws relating to the appointment of committees by the FINRA Regulation Board and the powers that can be delegated to such committees under Delaware law (see FINRA Regulation By-Laws Article IV, Section 4.13, which would be renumbered as Section 4.12); ^[43]
• delete provisions in the FINRA Regulation By-Laws that specifically provide for two committees of the FINRA Regulation Board that do not currently exist and are not needed today for the operation of the FINRA Regulation Board,i.e., an Executive Committee ^[44] and Finance Committee; FINRA notes that the creation of any such committees in the future would be governed by the provisions of the FINRA Regulation By-Laws relating to committees generally, and the size, composition and other requirements for such committees would be specified in the committee governing documents ( see FINRA Regulation By-Laws Article IV, Section 4.13 (which, as noted above, would be renumbered as Section 4.12));
• update provisions in the FINRA Regulation By-Laws pertaining to indemnification and advancement of expenses to reflect market practice and current case law, and clarify that certain indemnification provisions do not apply to committee members who are not Directors (see FINRA Regulation By-Laws Article X); ^[45]
• clarify requirements in the FINRA Regulation By-Laws regarding FINRA Regulation's share certificates, stock ledger and corporate seal (see FINRA Regulation By-Laws Article XI, Sections 11.2 through Section 11.4 and Article XII, Section 12.1, respectively);
• clarify in the FINRA Regulation By-Laws that records may be maintained by any method permitted by Delaware law (see FINRA Regulation By-Laws Article XII, Section 12.5); and
• make additional updates and clarifying changes to ensure internal consistency and conformity with Delaware law.

Proposed Technical and Conforming Updates

FINRA is proposing a number of technical and conforming changes to the FINRA By-Laws and FINRA Regulation By-Laws. The proposed rule change would:

• delete defined terms and provisions in the FINRA By-Laws relating to the closing of the transaction to consolidate NASD with NYSE Regulation, the subsequent transitional period and legacy committees that were only operable during the transitional period following the closing (among others,see FINRA By-Laws Article I, Article IX, Section 7 and Article XXII);
• change references from NASD and NASD Regulation to FINRA and FINRA Regulation (among others,see FINRA By-Laws Article I and FINRA Regulation By-Laws Article I);
• remove references in the FINRA By-Laws to NASD Dispute Resolution, which was merged into FINRA Regulation in 2015 (among others,see FINRA By-Laws Article I);
• update the provisions relating to mailing notices and other information to allow for electronic communication in lieu of paper mailing (see FINRA By-Laws Article XXI and FINRA Regulation By-Laws Article VI, Section 6.3);
• update the provisions relating to FINRA's registered agent, as they are currently outdated and may change from time to time (see FINRA By-Laws Article II and FINRA Regulation By-Laws Article II);
• update defined terms, including adding a definition of “Restated Certificate of Incorporation” and deleting “beginning with the Rule 0100 Series” in the definition of “Rules of the Corporation” (see FINRA By-Laws Article I and FINRA Regulation By-Laws Article I); and delete definitions that are no longer used, such as “Floor Member Governor,” “Independent Dealer/Insurance Affiliate Governor” and “Investment Company Affiliate Governor” ( see FINRA By-Laws Article I); ^[46] and
• renumber provisions and update cross-references throughout the FINRA By-Laws and FINRA Regulation By-Laws.

Proposed Amendments to the Certificate of Incorporation

FINRA is proposing to amend the Certificate of Incorporation, which will be filed with the Delaware Secretary of State, to conform relevant provisions to the amended and restated FINRA By-Laws. Specifically, the proposed rule change would amend Article Second to update FINRA's registered office and registered agent; Article Eighth to update provisions relating to the composition of the FINRA Board, terms of office and classes of appointed and elected Governors; and Article Twelfth ^[47] to update definitions in accordance with the proposed amendments to the FINRA By-Laws.

In addition, Article Fifth of the Certificate of Incorporation would be amended to update the provisions relating to indemnification, advancement of expenses and liability insurance to align with current Delaware law and market practice. The amended Certificate of Incorporation also would clarify that certain indemnification and insurance provisions do not apply to committee members who are not Governors, other than members of FINRA's Investment Committee.

Finally, the proposed rule change would make technical conforming changes to the Certificate of Incorporation, e.g., to change NASD to FINRA and remove references to the transitional period following the closing of the transaction to consolidate NASD with NYSE Regulation, including the deletion of Article Eleventh.

If the Commission approves the proposed rule change, the effective date will be the date of filing with the Delaware Secretary of State of an amended and restated Certificate of Incorporation, which is intended to be no later than the commencement of the 2027 Annual Meeting. FINRA anticipates that the 2027 Annual Meeting will take place during the third or fourth quarter of 2027.

2. Statutory Basis

FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(2) of the Act,^[48] which requires that FINRA be so organized and have the capacity to be able to carry out ( printed page 73307) the purposes of the Act, to comply with the Act and to enforce compliance by FINRA members and persons associated with members with the Act, the rules and regulations thereunder, FINRA rules and the rules of the MSRB; Section 15A(b)(4) of the Act,^[49] which requires that FINRA's rules assure a fair representation of its members in the selection of its directors and administration of its affairs and provide that one or more directors shall be representative of issuers and investors and not be associated with a member of FINRA, broker or dealer; and Section 15A(b)(6) of the Act,^[50] which requires, among other things, that FINRA rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest.

FINRA believes that the proposed rule change to revise FINRA's Board governance structure provides for the organization of FINRA in a manner that will continue to enable FINRA to carry out the purposes of the Act and to comply and enforce compliance by FINRA members with the Act. FINRA believes that the proposed rule change assures a fair representation of FINRA's members in the selection of its Governors and administration of its affairs and complies with the public participant requirements of the Act, including the issuer and investor representation requirement.

As discussed above, the proposed rule change would transition the FINRA Board to a majority of Industry Governors, while preserving a substantial role for public representatives on the Board. Seven Industry Governor seats ( i.e., three Small Firm Governors, one Mid-Size Firm Governor and three Large Firm Governors) would continue to be elected by small, mid-size and large member firms, respectively. The conversion of three appointed segment-specific Industry seats to three appointed At Large Industry seats would potentially broaden industry representation, including among small firms.

FINRA members will continue to have extensive involvement in the administration of FINRA's affairs through participation in advisory committees, disciplinary hearing panels and the National Adjudicatory Council, among others. The Commission has previously found that such participation further provides for the fair representation of members in the administration of the affairs of an SRO, particularly with respect to participation on committees relating to rulemaking and relating to the disciplinary process.^[51]

At the same time, the proposed rule change would preserve a substantial role for public representatives on the Board by requiring that the number of Public Governors on the Board be one or two less than the number of Industry Governors. The Public Governors would represent no less than 41.7 percent of the total number of Industry and Public Governors on the Board. In addition, the proposed rule change provides for a minimum number of Public Governors on Board committees, and the Audit Committee must continue to be public majority and chaired by a Public Governor. The Commission has previously found that Public Governors, none of which may have a material relationship with a broker or dealer or registered SRO, satisfy the requirement under the Act to have at least one director representative of issuers and investors.^[52]

FINRA believes its internal safeguards, along with comprehensive SEC oversight and evaluation of such oversight by the GAO, provide strong assurance that FINRA will continue to perform its investor protection responsibilities and safeguard market integrity.

Finally, FINRA believes that the proposed amendments to make technical and other conforming changes to, among other things, update defined terms and cross-references, will provide greater clarity to members and the public regarding FINRA rules and FINRA's corporate documents as they appear in the FINRA Manual.

B. Self-Regulatory Organization's Statement on Burden on Competition

FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The regulatory need for the proposed rule change is described above in Item II.A.1.

Economic Baseline

The economic baseline for the proposed rule change consists of the current FINRA By-Laws governing the composition, structure and operation of the FINRA Board and its committees.

In general, corporate boards provide direction, monitoring and accountability to help ensure stewardship and enable the organization to have access to vital external resources and information.^[53] As the Board of an SRO, FINRA's Board differs from conventional corporate boards in that it is meant to provide fair representation across its membership and serve the other statutory requirements of the Act.^[54] Although there may be broad agreement on the importance of these requirements, individual Governors may differ in their perspectives and beliefs as how to best meet FINRA's statutory obligations. Industry Governors will typically have more technical and detailed current knowledge regarding the brokerage industry, member-firm business models and evolving industry conditions, while Public Governors will have a wider variety of backgrounds reflective of the governance needs of the organization, which will not always include knowledge of the brokerage industry that is comparable to Industry Governors.

Industry and Public Governors will, given the requirements of their classification, have different backgrounds, business affiliations and relationships. Each individual Governor will be informed by their own experience and current situation, thus perspectives, knowledge and incentives may differ both between the groups and among Governors within each group. The balance of these may influence the Board's oversight of and advice to management and, in turn, how FINRA fulfills its mission.^[55] Differences among ( printed page 73308) Industry Governors' interests and incentives along with substantial participation by Public Governors can contribute to ensuring balance in governance and fulfillment of FINRA's statutory obligations. These same characteristics of the board also support the public's confidence in its stewardship of the public interest.

The relevance of the extent and type of expertise accessible to the Board and Board committees will vary depending on the context. For example, when considering if or how to respond to new industry products or business practices, detailed technical Board knowledge informed by different experiences may be of particular importance. In other contexts, there may be a stronger emphasis on the Board's needs in broader areas that extend outside the industry, such as corporate governance, technology management or public policy.

Economic Impacts

The proposed rule change would alter the composition of the Board and its committees in several respects, as outlined above. Specifically, these changes may improve FINRA's ability to fulfill its mission by modernizing the organization's governance and strengthening the self-regulatory model. This would include increasing access to industry expertise and providing greater flexibility to manage the Board's operations. In particular, the proposed rule change may broaden the range of business models represented on the Board, including those of small firms, and enhance the Board's ability to draw on expertise relevant to evolving market and industry conditions. Greater access to member knowledge, experience and insight may, in turn, support more informed and responsive decision-making.^[56] For the wide range of issues coming before the Board of Governors that are informed by the technical considerations of financial services, the option for broader industry input—over potentially a wider range of perspectives—may lead to better designed regulatory outcomes, enhancing investor protections and market integrity. At the same time, where technical considerations may be of lesser importance, the proposed rule change preserves substantial Public Governor representation that should continue to enable the Board to meet its obligations critical for governance. Greater potential diversity of representation across Industry Governors, combined with the continued substantial Public Governor representation, should serve to mitigate risk that any one set of interests or incentives could predominate in governance. Moreover, Public Governors would continue to have the Chair and a majority on the Audit Committee, providing another important mitigant.

The above discussion about changes in the Board composition also broadly applies to Board committees. While the Board retains oversight of the Board committees' decisions, to the extent that there are resulting shifts in the composition of Board committees, the same considerations related to achieving a mix of industry and public representation apply to Board committees as well.

The existing structural safeguards detailed above would provide additional assurance that FINRA will continue to perform its statutory obligations. Among other things, the composition and responsibilities of offices within FINRA, such as OHO and ODA, that have a high degree of defined independence, would not change. Also, external governance such as comprehensive SEC oversight and the GAO's evaluation of that oversight may complement internal governance.

In addition to the amendments altering the composition of the Board and its committees, the proposed rule change would alter Board structure and continuity. A smaller Board may facilitate coordination and decision-making but may include fewer voices with differing experience and knowledge to address complex issues.^[57] Under the proposed rule change, however, the Board would continue to have a broad range of pertinent expertise and experience. In particular, the conversion of three Industry Governor seats currently reserved for specific segments to at-large seats, as well as the broad expertise residing with Public Governors, may provide the Board greater ability to draw on expertise based on the needs of the organization.

Finally, the number of consecutive three-year terms a Governor may serve would increase from two to three. The additional term may preserve institutional knowledge and Board experience by allowing Governors whose continued service would benefit the Board to serve for another three years.^[58]

Alternatives Considered

No alternatives were considered for purposes of this statement.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others

Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will:

(A) by order approve or disapprove such proposed rule change, or

(B) institute proceedings to determine whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:

Electronic Comments

• Use the Commission's internet comment form (www.sec.gov/​rules/​sro.shtml); or
• Send an email torule-comments@sec.gov. Please include File Number SR-FINRA-2026-024 on the subject line. ( printed page 73309)

Paper Comments

• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2026-024. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's internet website ( www.sec.gov/​rules/​sro.shtml). Copies of the filing will be available for inspection and copying at the principal office of FINRA. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to File Number SR-FINRA-2026-024 and should be submitted on or before December 4, 2026.