By: Jacqueline Hallihan
Washington, D.C. | March 5, 2026
A. Valerie Mirko, a partner at Armstrong Teasdale LLP and leader of its Securities Regulation and Litigation practice, testified before the U.S. House Committee on Financial Services Subcommittee on Capital Markets on March 5, 2026, urging Congress to take a more active role in overseeing the self-regulatory organizations (SROs) that govern the U.S. broker-dealer industry. Drawing on more than 20 years of securities law experience, including work at two broker-dealers, several years as General Counsel of the North American Securities Administrators Association, and private practice representing broker-dealers and investment advisers, Mirko offered ten concrete recommendations organized around five themes.
The Case for Reform
Mirko opened by affirming that U.S. capital markets are the strongest in the world, in part because of thoughtful securities regulation. She acknowledged that FINRA is currently in the second year of its FINRA Forward initiative, which has already brought greater transparency to some long-standing operations. Even so, she argued that the SRO model, which delegates regulatory authority from the government to industry groups, only works when the SEC actively and visibly supervises them. Congress, she said, has its own responsibility to ensure that SROs operate with fairness, transparency, and neutrality consistent with their delegated authority.
Strengthening Governance at the Top
Mirko’s first set of recommendations targets governance. She noted that the Exchange Act currently imposes no specific requirements for how SROs structure their boards, and the SEC has no formal mechanism for coordination at the leadership level. To close that gap, she recommended that the SEC Chair or a delegated Commissioner serve as a non-voting, ex-officio member of each SRO Board of Governors. She also recommended that Congress align board composition requirements across FINRA and the MSRB, using the MSRB’s more detailed standards as a model. In addition, she pointed out that neither FINRA nor the MSRB has term limits for its chief executive officer, and suggested Congress consider instituting them to provide formal performance accountability through periodic reappointment.
Due Process in Enforcement
Perhaps the most pointed section of Mirko’s testimony addressed due process in FINRA’s enforcement program. She explained that while member firms cannot be expelled without SEC review and approval, individuals who are barred by FINRA face a different standard: their bar takes effect immediately, with no automatic stay pending SEC review. Because a bar can end a career in the securities industry, Mirko argued that this creates a serious risk of irreversible professional and economic harm before any government official has formally reviewed the decision. She recommended that Congress amend the Exchange Act to require SEC review before every FINRA bar or expulsion becomes effective, giving individuals the same protections currently available to firms. She also recommended that Congress consider codifying a definition of “regulation by enforcement,” a practice in which enforcement actions effectively establish new standards for conduct that market participants had no prior opportunity to understand or comment on.
Addressing Inefficiency and Lack of Transparency
Mirko also called attention to inefficiencies within SRO operations. FINRA operates a wide range of technology systems, including the Central Registration Depository (CRD) and the Consolidated Audit Trail (CAT). FINRA’s technology vendor responsibilities represent approximately 29 percent of its annual budget. She noted that there is no comprehensive public inventory of these systems, no clear public justification for why FINRA operates each one, and no accounting of potential duplication. She recommended the SEC conduct a thorough review. She also called for expanding the existing GAO oversight requirement under the Dodd-Frank Act to include a specific review of FINRA’s Department of Enforcement, which is currently not among the eleven areas the GAO is required to examine. Finally, she recommended codifying the current voluntary practice of publishing an annual report and budget and requiring more detailed line-item budget disclosures.
Modernizing the Rulemaking Process
On rulemaking, Mirko described a process that has not kept pace with changes in the financial services industry. Because updating the rulebook is slow and complex, FINRA has increasingly relied on Regulatory Notices, FAQs, and responses to interpretive questions to guide member-firm compliance. Some of these documents are more than three decades old, yet firms continue to rely on them, and varying interpretations lead to inconsistent application of the rules across the industry. Mirko recommended that Congress require the SEC to conduct a retroactive review of all FINRA member guidance and rules every five years and report the findings to Congress. She also recommended streamlining rule approval so that straightforward technical changes, such as inflation adjustments, can proceed through notice to the Division of Trading and Markets, while economically or systemically significant rules require final approval from a majority of Commissioners.
Improving FINRA Arbitration
Mirko’s final recommendation addressed FINRA’s arbitration process. She acknowledged that FINRA Dispute Resolution has worked to modernize its rules and processes, including through a Regulatory Notice issued the same week as her testimony, and she praised those efforts. She recommended that the SEC conduct a study within 270 days to examine minimum qualifications for arbitrators, including their experience, compensation, and familiarity with current rules. The study would also explore whether panel chairs should be required to be licensed attorneys, whether attorneys who have previously represented claimants in FINRA arbitrations should be excluded from serving as public panelists, and whether the non-public (industry) panelist category should be reduced or eliminated altogether.
Looking Ahead
Throughout her testimony, Mirko emphasized that her goal is not to weaken SRO regulation but to strengthen it by making it fairer, more transparent, and more accountable to the oversight structure Congress intended. Smart, right-sized regulation, she concluded, is what keeps U.S. markets resilient and accessible to all Americans.