Addressing FINRA’s 2025 Guidance on Risk Monitoring: Strategies for CAT and CAIS Compliance

 

The 2025 FINRA Annual Regulatory Oversight Report (AROR) places a strong spotlight on modern risk monitoring, particularly for firms subject to FINRA CAT, FINRA CAIS, and broader regulatory data-reporting mandates. As firms face escalating cybersecurity threats, market manipulation schemes, and vendor-related vulnerabilities, FINRA expects members to modernize their surveillance programs and strengthen internal governance. In this fast-evolving environment, aligning with the latest standards — especially around Consolidated Audit Trail (CAT) Compliance and Customer Account Information System (CAIS) reporting — is now mission-critical.

This article explores FINRA’s latest risk-monitoring expectations, actionable compliance strategies, and how adopting advanced RegTech solutions such as Regulatory Surveillance and Management System (RSMS) and CAIS-Connect empowers broker-dealers to streamline reporting, minimize errors, and proactively address emerging risks.

Why Risk Monitoring Is Now a Core FINRA Priority

FINRA makes it clear: risk monitoring is no longer merely a supervisory function. It is a strategic safeguard for protecting investors, maintaining market integrity, and preventing operational failures. The 2025 report urges firms to:

  • Identify and monitor emerging risks
  • Strengthen escalation and reporting workflows
  • Maintain accurate FINRA CAT and FINRA CAIS submissions
  • raud: The Top Risk Theme of 2025

Cybersecurity continues to dominate FINRA’s risk agenda. With increasing ransomware, phishing, and credential-theft attempts, firms are urged to deploy:

  • Multi-layer cybersecurity frameworks
  • System monitoring and threat-intelligence programs
  • Incident-response escalation workflows
  • Vendor cybersecurity checks and certifications

Cyber breaches are no longer isolated IT risks — they directly jeopardize compliance data, including CAIS client records and CAT trade submissions. A compromised vendor system can instantly trigger downstream exposure, elevating the urgency of strong third-party oversight.

AML, Fraud Prevention, and Surveillance Expectations

The report reinforces that Anti-Money Laundering programs must be risk-based and analytics-driven. FINRA highlights:

  • Enhanced due-diligence for high-risk customers
  • Pattern-recognition for transaction monitoring
  • Strong alerting, documentation, and SAR escalation
  • Stronger controls to combat cyber-enabled scams

Modern AML and fraud controls are increasingly linked with broader trade surveillance — an area where RSMS platforms can centralize monitoring and enable faster decision-making.

Manipulative Trading, Best Execution, and CAT Reporting Accuracy

FINRA continues to prioritize market-integrity risks, especially relating to:

  • Manipulative trading behavior
  • Extended-hours oversight gaps
  • Best-execution supervision
  • Accurate Consolidated Audit Trail (CAT) Compliance

The AROR again stresses that CAT reporting must be complete, accurate, and reconciled. Firms are expected to demonstrate oversight through:

  • Automated validations
  • Exception reporting
  • Surveillance of irregular trade patterns
  • Strong audit-trail controls across the trade lifecycle

This is where advanced RegTech is no longer optional — FINRA CAT reporting is simply too complex and time-sensitive for manual monitoring.

Third-Party Vendor Risk: A Growing 2025 Priority

As firms increasingly rely on external vendors, FINRA outlines stricter expectations for vendor transparency, cybersecurity, and data-handling. Firms must:

  • Maintain vendor risk-assessment frameworks
  • Document incident-reporting clauses
  • Monitor fourth-party dependencies
  • Enforce data-access controls and certifications

Vendor vulnerabilities can directly compromise CAIS and CAT data integrity — making vendor surveillance a core compliance obligation.

How Technology Strengthens CAT & CAIS Risk Monitoring

The AROR strongly encourages firms to adopt modern, automated compliance frameworks. Tools like a Regulatory Surveillance and Management System (RSMS) offer:

  • Centralized risk and surveillance management
  • Automated trade-data validation
  • Faster detection of suspicious or error-prone activity
  • Reduced manual workloads for compliance teams

For FINRA CAIS, specialized solutions like CAIS-Connect streamline:

  • Name-matching
  • Customer record verification
  • Error reconciliation
  • Submission accuracy and timelines

For FINRA CAT, scalable automation ensures:

  • Fewer reporting breaks
  • Accurate linkage and sequencing
  • Real-time exception management

In short — technology reduces risk, reduces cost, and reduces regulatory exposure.

RSMS + CAIS-Connect: Empowering Firms for CAT and CAIS Success

To meet FINRA’s elevated expectations, firms benefit from integrating advanced compliance platforms. The RSMS Suite by Capital Market Solutions delivers:

CapabilityBenefitRSMS (Regulatory Surveillance and Management System)Unified risk monitoring + surveillanceCAIS-Connect for FINRA CAISClean customer data + accurate CAIS reportingCAT Reporting SupportSimplified Consolidated Audit Trail (CAT) Compliance

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