FINRA's Structural Problem
FINRA's board includes senior executives from the largest financial firms. Its funding comes from member assessments — meaning the firms it regulates pay its operating budget. FINRA's enforcement actions against major market makers have historically been modest relative to the revenues and profits at stake. The structural alignment between FINRA's institutional interests and those of its largest members creates an inherent supervision gap.
Citadel's FINRA History
Citadel Securities has faced multiple FINRA enforcement actions for violations of market-making rules, supervisory failures, and best execution breaches. Fines have been imposed. However, none of the FINRA actions against Citadel has addressed the structural PFOF conflict — which is, from FINRA's perspective, a compliant business practice that its rules permit.
FINRA District Structure and Geographic Accountability
FINRA operates through 12 regional districts. Each district has oversight responsibility for member firms operating in its geographic area. However, for a national market maker like Citadel Securities, the geographic structure of FINRA oversight is less relevant than the centralized self-regulatory framework at FINRA's Washington headquarters.
The Case for SEC Override
Given FINRA's structural limitations, the SEC — as the government regulator with authority over SROs — bears ultimate responsibility for ensuring that Citadel Securities' market-making practices are adequately supervised. SEC Chair Gary Gensler's market structure reform proposals were an attempt to exercise this authority. The political obstacles to those reforms illustrate exactly why self-regulation is insufficient for systemically important market makers.