FINRA Rule 1014 Explained: Standards for Admission

What Is FINRA Rule 1014?

FINRA Rule 1014 exists to protect the integrity of the broker-dealer industry. It gives FINRA a structured way to decide who can become a member firm. 

The rule evaluates if the new entrants, whether traditional broker-dealers or fintechs, are capable of operating responsibly, meeting regulatory expectations, and safeguarding investor interests.

At its core, Rule 1014 is about setting a minimum bar. FINRA uses it to evaluate if a firm has the people, systems, financial resources, and controls necessary to run a compliant business. 

The goal goes beyond initial launch. It also verifies that the firm can sustain operations without creating unnecessary risk to the market or to customers.

For firms with innovative or nontraditional models, Rule 1014 provides a way for FINRA to assess how those models fit within the broader regulatory environment.

The 14 FINRA Rule 1014 Standards Explained

Before FINRA approves a broker-dealer membership application, it evaluates the firm against 14 distinct standards outlined in Rule 1014. FINRA may stop reviewing the application altogether if it’s not “substantially complete.” Missing or inconsistent information is one of the most common causes of delay or rejection early in the process. The firm must address all 14 standards to be approved:

1. Complete and Accurate Application

FINRA expects the membership application and all supporting documentation to be complete, truthful, and internally consistent. That includes your business plan, written supervisory procedures (WSPs), financial statements, contracts, and any required disclosures.

This means that:

• Every section of Form NMA must be filled out.

• All attachments must be current and aligned with your stated business model.

• There should be no conflicting details between documents (e.g., your business plan says you’ll do retail trading, but your financials assume only institutional clients).

2. Licensing and Registration

A firm, and every individual associated with it, must hold the appropriate licenses and registrations required by FINRA, the SEC, and relevant state regulators. This includes both the firm’s entity-level approvals and the individual qualifications of your principals and registered representatives.

This typically means:

• The firm is registered with the SEC via Form BD.
  
  

• The firm has a minimum of two principals.
  
  

• Individuals in supervisory roles have passed the relevant FINRA exams (e.g., Series 24 for principals, Series 27 or 28 for FINOPs).
  
  

• Representatives who will interact with clients or handle trades are also properly registered (e.g., Series 7, Series 63, etc.).
  
  

• State-level registration may also be required for both the firm and individuals, depending on where the business will be conducted.

FINRA will review the Central Registration Depository (CRD) records to confirm everything lines up. If any required exams are missing, incomplete, or not yet approved, the application will be considered deficient. 

3. Compliance and Integrity

FINRA evaluates whether the firm and its associated persons are capable of operating within the rules: ethically, responsibly, and in line with securities laws and FINRA standards. This is about demonstrating that a team has the background, structure, and discipline to run a compliant business.

Here’s what FINRA looks at:

• Regulatory history of the firm and its key personnel, including any past enforcement actions, terminations for cause, or pending investigations.
  
  

• Unpaid arbitration awards or settlements involving the firm or its control persons.
  
  

• Pending litigation or regulatory inquiries that could affect the firm's ability to meet obligations.
  
  

• Sales practice concerns, such as a history of customer complaints or risky business conduct.

If any of these red flags appear, FINRA applies a presumption of denial. The firm must then show, through enhanced supervision plans, internal controls, or staffing changes, that it can still meet the standards of commercial honor and investor protection.

4. Business Arrangements

FINRA wants to see that the firm has secured, or is actively finalizing, all the critical relationships and contracts needed to operate the business as described in the application.

This includes arrangements with:

• Clearing firms

• Custodians

• Banks (for customer fund handling, if applicable)

• Technology providers (e.g., trade execution platforms, CRM systems, compliance tools)

• Third-party service providers (e.g., compliance vendors, cybersecurity partners)

These agreements don’t always need to be fully executed at the time of application, but they must be well-developed and aligned with your business plan. Draft contracts, signed term sheets, or letters of intent may be acceptable in some cases.

FINRA assesses whether these arrangements are sufficient to support the proposed operations and meet applicable regulatory requirements. A vague or missing vendor strategy is a common reason applications stall, especially for fintechs relying on custom integrations or nontraditional infrastructure. 

5. Facilities and Office Setup

FINRA requires that the firm either already has, or has clear plans to obtain, facilities appropriate for the size and scope of its operations. FINRA wants to see that the firm is operationally prepared to run its business day to day.

Key considerations include:

• Office location(s) aligned with the business plan

• Sufficient space for supervisory and operational staff

• Secure storage for required records (physical or digital)

• Ability to meet customer service, trading, and compliance obligations

Remote or hybrid models are acceptable, but FINRA will still expect clarity around how the firm will handle supervision and recordkeeping. If a firm plans to operate with limited physical presence or use a virtual office provider, it should be prepared to explain how compliance and business continuity will be maintained.

6. Systems and Technology

FINRA reviews whether the firm’s technology stack is capable of supporting its proposed operations and whether it has a plan for business continuity. This includes both front-end tools (used to interact with clients or execute trades) and back-end systems (used for compliance, recordkeeping, supervision, and reporting).

Areas FINRA typically evaluates:

• Trading and execution platforms

• Customer onboarding and KYC/AML systems

• Email and communication tools

• Compliance and surveillance systems

• Business continuity and disaster recovery planning

For fintech firms, FINRA often expects a demo or walkthrough of the platform, especially if it’s central to the business model. A system that isn’t fully built yet can delay or derail the application.

FINRA doesn’t require specific vendors or technologies, but it does expect systems to be tested, documented, and capable of maintaining compliance. 

7. Net Capital Requirements

FINRA assesses whether the firm has enough capital, not just to meet the minimum required by SEC Rule 15c3-1, but to sustain operations and meet expenses net of revenues for at least 12 months. This is about financial resilience, not just technical compliance.

What FINRA considers:

• Whether the firm can avoid early warning triggers under SEC Rule 17a-11

• Projections showing 12 months of expenses covered, net of anticipated revenue

• Planned activities that increase capital risk (e.g., market making, proprietary trading, underwriting)

• Inventory risk, liquidity of products, and volatility of assets involved

• Any other financial exposures in the first year of operations

FINRA may impose a higher-than-minimum net capital requirement if the firm’s business model warrants it. The firm must also document the source of its funding: FINRA will expect to see bank statements, contribution records, or loan agreements, not just a line item on a spreadsheet.

8. Financial Controls

Beyond having enough capital, FINRA looks at how the firm will manage that capital. This standard focuses on internal financial controls: the systems and processes that safeguard financial accuracy, regulatory compliance, and timely reporting.

Key expectations include:

• A reliable general ledger and accounting system

• Procedures for daily net capital calculations (if required)

• Segregation of duties to prevent financial errors or fraud

• Controls for expense tracking, revenue recognition, and invoicing

• A designated Financial and Operations Principal (FinOp) with the appropriate license (Series 27 or 28)

For firms that don't handle customer funds, the requirements may be lighter, but controls still matter. FINRA expects financial processes to be clearly supervised, documented, and tested. If a firm outsources accounting or uses cloud-based platforms, it should be ready to explain how oversight and data integrity are maintained.

9. Industry-Standard Operations

FINRA expects new member firms to adopt compliance, supervisory, operational, and internal control practices that reflect common standards across the broker-dealer industry. The rule doesn’t demand a one-size-fits-all model, but it does require that your controls be appropriate for the business.

This includes:

• A functional compliance program that goes beyond templates

• Operational workflows that support regulatory obligations (e.g., trade reporting, AML reviews, disclosures)

• Internal testing or audit mechanisms to catch and fix gaps proactively

This standard often raises questions for fintech firms with nontraditional models. FINRA isn’t asking businesses to copy legacy firms, but they must show that the controls meet the same regulatory objectives, even if they look different.

10. Supervisory Structure

FINRA closely evaluates a firm’s supervisory system to ensure it can prevent and detect violations effectively. This goes beyond having procedures on paper. It’s about having the right people, in the right roles, with the right experience.

Key factors FINRA considers:

• Written supervisory procedures (WSPs) tailored to your specific activities

• Whether there are enough qualified principals to oversee business activities

• If supervisors have relevant experience in the areas they’re assigned to manage

• How supervision will be handled across locations (especially remote or part-time setups)

• Whether each associated person’s role and registration are clearly defined

• Plans for heightened supervision if any personnel have a history of disciplinary issues

Each supervisory function should be tied to a specific individual, and that individual should have one year of direct experience or two years of related experience in the area they’re overseeing. For example, a principal supervising retail trading must be familiar with the nuances of that space, not just general compliance.

If the business model is complex or highly automated (as is often the case with fintechs), FINRA may expect a deeper bench of experienced supervisors. Weak or vague supervisory assignments are a common red flag during application review.

11. Recordkeeping and Retention

FINRA requires that firms have a recordkeeping system that complies with SEC, FINRA, and state regulatory requirements. This means records should be created, maintained, and retrievable in the right format for the required time periods.

Your recordkeeping setup should include:

• Systems to capture and archive required communications (emails, chats, trade confirmations, etc.)

• Processes to generate and retain regulatory reports, blotters, and books and records

• Secure storage (cloud or on-premise) with access controls and audit trails

• Staff who understand what must be retained and how to retrieve it during audits or exams

FINRA also evaluates whether your staffing level is appropriate to handle recordkeeping responsibilities. Even with automated tools, someone must be responsible for oversight, error resolution, and regulatory responses.

Firms that plan to outsource or use third-party vendors for archiving must show they retain control and access. For fintechs, this often includes demonstrating that custom-built platforms or messaging tools comply with retention rules. A firm’s recordkeeping controls may be deemed inadequate if FINRA can’t clearly see how records will be managed and retrieved.

12. Continuing Education

FINRA requires firms to assess their training needs and implement a written continuing education (CE) training plan that meets regulatory expectations. 

A CE program should address:

• A formal training needs analysis based on roles and business lines

• Regulatory Element training required by FINRA for registered individuals

• Firm Element training tailored to their specific operations and risk profile

• Documentation of training completion and tracking over time

• A designated person or team responsible for managing the program

Startups sometimes treat CE as a future concern, but for FINRA, it’s a readiness issue. The expectation is that your plan is active before launch and covers both compliance topics and role-specific skills.

13. No Intent to Circumvent Rules

FINRA assesses whether there’s any indication that the firm, or individuals associated with it, may attempt to avoid, evade, or undermine regulatory obligations. This is a broad safeguard that allows FINRA to deny membership even if everything looks acceptable on the surface.

Scenarios that raise concern:

• Hidden ownership or control by barred or disqualified individuals

• Undisclosed relationships with outside entities that will influence operations

• Business models structured to sidestep regulatory classifications or licensing requirements

• Past attempts to rebrand or relaunch previously disciplined firms under new names

This standard gives FINRA discretion to challenge applications that appear technically compliant but raise red flags based on background, structure, or intent.

Firms with complex affiliations, shared control, or any regulatory baggage must clearly disclose that information. Trying to conceal or downplay material facts is the fastest way to trigger scrutiny under this standard.

14. Consistency with Securities Laws

The final standard is a catch-all: FINRA checks whether the application and supporting documents are consistent with federal securities laws, SEC regulations, and FINRA rules. Even if a firm meets the other 13 standards, it can still be denied if the proposed business model, structure, or operations conflict with broader regulatory requirements.

This includes:

• Business plans that conflict with SEC rules or interpretations

• Activities that require additional registrations or exemptions that the firm doesn’t have

• Offerings or services that involve securities law gray areas without appropriate legal analysis

• Marketing or communications that suggest noncompliant practices

For fintech firms especially, this standard comes into play when the model pushes into untested regulatory territory, like tokenized securities, embedded trading features, or hybrid financial products.