Law and Order – May 2026: The Comfort Crisis

The Financial Industry Regulatory Authority, Inc. (FINRA) posts the disciplinary actions it took to an online database. It also publishes a monthly summary of these actions, which is a worthwhile read for those in the industry—if only for insight into FINRA’s current priorities. Below, I offer a thought on FINRA’s May 2026 edition – which, not coincidentally, comes from one of the books that I have on my bookshelf at home.

The Comfort Crisis

One of the challenges of compliance is that success can create its own problems. A policy works for several years. An exception report catches issues. A surveillance tool identifies potential misconduct. An AML review functions as intended. Eventually, people become comfortable. The process appears to be working, so attention shifts elsewhere.

That is when trouble can begin.

Several matters in FINRA’s May report involved firms that had policies, systems, reports, or procedures in place, but failed to confirm they were addressing the risks presented by the business.

For example, one matter in the May report involved a firm that failed to accurately report customer complaints. The problem did not appear to be technology, staffing, or even the reporting process itself; no one checked to determine if employees were given clear guidance on what qualified as a complaint.

The Lesson – A Misogi

Michael Easter argues in his book The Comfort Crisis that our reliance on modern conveniences comes at a significant cost.

He encourages the reader to do an occasional “misogi” – an event so challenging that there is a significant chance of failure.

I am not suggesting that completing a compliance review should be like finishing a GoRuck event (I’ve done a couple of those), but the concept is the same. The May report covered different rules, different business lines, and different supervisory failures. Yet many of the matters shared a common thread: Firms relied on controls that were no longer receiving the attention necessary to ensure they remained effective. Conducting a strenuous review of compliance systems – a “compliance misogi”, if you will – can confirm that systems are functioning as intended or offer an opportunity for improvement.

Because broker-dealers, registered investment advisers and their associates want to spend their time serving their clients.