Concerned that some of its practices may actually hurt diversity and inclusion, FINRA recently released a regulatory notice asking for comments to identify any FINRA rules or regulations which might be having a disparate impact on certain groups within the industry.

“FINRA staff’s preliminary conversations with some industry participants have suggested the potential that aspects of FINRA’s rules, operations and administrative processes may unintentionally impede diversity and inclusion,” the regulator said in the notice.

For instance, certain background data that must be provided by applicants for securities industry registration may be a problem for some candidates, the regulator added.

While the industry continues to push the theme of diversity, white males still dominate 98.7% of the $69 trillion asset management industry, a 2019 Knight Foundation study found.

“FINRA seeks comment on any aspects of our rules, operations and administrative processes that may create unintended barriers to greater diversity and inclusion in the broker-dealer industry or that might have unintended disparate impacts on those within the industry,” the regulator said.

FINRA is asking for comments on the following areas:

1. What FINRA rules or market practices “have a disparate impact on individuals in the broker-dealer industry (on the basis of national origin, language, age, gender, race, color, ethnicity, socioeconomic status, religion or spiritual practice, disability, sexual orientation, gender identity, family structure or veteran status) or discourage participation in the broker-dealer industry?” the regulatory asked.

2. Does the way that Finra applies its rule have “a disparate impact on individuals in the broker-dealer or discourage participation in the broker-dealer industry?”

3. Do Finra operations and administrative processes “have a disparate impact on individuals in the broker-dealer industry or discourage participation in the broker-dealer industry?”

4. The regulator wants to know if Finra’s collection and publication of registered reps’ “background data, including that which relates to education, employment status, tenure, and complaints and grievances, create an unintended barrier to greater diversity in the broker-dealer industry?”

5. Last but not least, Finra is asking if there is any additional changes it could make to rules to “affirmatively foster diversity, inclusion and equal opportunity in the broker-dealer industry?”

FINRA’s Board of Governors has expressed support for initiatives to promote greater diversity and inclusion and “to better engage traditionally underinvested communities to serve the needs of all investors,” the regulator said.

FINRA has undertaken a number of initiatives already, including:

• Establishing a “Racial Justice Task Force” which is tasked with identifying opportunities to encourage greater diversity and inclusion within the broker-dealer industry, especially in underinvested communities.

• Hosting an Annual Diversity Summit  to give practitioners and business leaders in the broker-dealer industry an industry forum;

• Developing the Securities Industry Essentials® (SIE®) Exam to expand who is eligible to take a qualification examination and to enable prospective broker-dealer industry professionals to demonstrate to potential employers a basic level of securities industry knowledge prior to a job application.

FINRA also created its own in-house diversity and inclusion initiatives for employees, including an award-winning Diversity Leadership Council launched in 2009, two formal mentoring programs, more than 20 executive “Diversity Dialogues;” an Employee Resource Group (ERG) program that has grown to nine organization-wide ERGs. Recently, FINRA also created and filled a role at the FINRA Investor Education Foundation “to build strategic partnerships and manage public engagement initiatives to benefit underserved financial consumers and include people from diverse cultures and socio-economic backgrounds,” the regulator said.

More information about FINRA’s diversity and inclusion initiatives is available here.