FINRA Compliance and HIPAA: Navigating Regulatory Overlap in Software Systems

Meeting compliance requirements like FINRA and HIPAA isn’t just a box to check; it’s a mission-critical task for building secure, trustworthy software. Both FINRA (Financial Industry Regulatory Authority) and HIPAA (Health Insurance Portability and Accountability Act) demand strict adherence to standards related to privacy and data security. But these mandates don’t exist in isolation. For companies operating at the intersection of financial and healthcare software, things can quickly become complex.

This post explores how FINRA and HIPAA compliance requirements overlap, the unique challenges they present, and actionable ways software teams can effectively address both regulations while reducing inefficiencies.

What Are FINRA and HIPAA?

FINRA governs the operations of financial services entities, ensuring honesty, integrity, and transparency in the securities business. It enforces various standards, such as data retention, supervised communication, and risk assessments, to maintain market integrity and investor protection.

HIPAA focuses on the healthcare sector, mandating the safeguarding of Protected Health Information (PHI). This includes security measures to prevent unauthorized access, data breaches, and mishandling of sensitive information.

Both regulations focus on data security and privacy, yet they apply to different contexts, which can make dual compliance tricky. If your software deals with both financial and healthcare information, you must account for both simultaneously.

The Overlap Between FINRA and HIPAA

While FINRA and HIPAA target distinct industries, their regulatory requirements often overlap in software systems. Below are some key areas where these two mandates align:

1. Data Security

• FINRA: Requires systems to use encryption, access controls, and secure storage for sensitive financial information.
• HIPAA: Imposes similar requirements to protect PHI using administrative, technical, and physical safeguards.

Key takeaway: Both require robust encryption, which must be implemented consistently across all systems.

2. Audit Trails

• FINRA: Demands robust recordkeeping of communications and transactions for regulatory oversight.
• HIPAA: Requires logs of accessing or modifying PHI for accountability.

Key takeaway: Unified and detailed audit trails can streamline compliance for both regulations.

3. Incident Management

• FINRA: Firms must establish protocols for handling suspected fraud or data breaches.
• HIPAA: Requires detailed breach risk assessments and timely disclosure to affected parties.

Key takeaway: Incident response plans must simultaneously meet FINRA’s transparency standards and HIPAA’s focus on patient notification.

4. Third-Party Vendor Oversight

• FINRA: Requires firms to manage risks posed by third-party vendors.
• HIPAA: Mandates Business Associate Agreements (BAAs) with third-party vendors who handle PHI.

Key takeaway: Vendor compliance cannot be taken lightly, as both HIPAA and FINRA hold organizations accountable for third-party actions.

Challenges of Dual Compliance

Adhering to just one of these standards is complex, but maintaining compliance with both simultaneously introduces complications such as:

• Conflicting Record Retention Rules: FINRA mandates data retention for up to six years, while HIPAA specifies timelines related to PHI handling. Aligning these requirements demands careful planning.
• Resource Allocation: Meeting two independent compliance frameworks can stretch engineering teams thin if workflows aren’t optimized.
• Fragmented Solutions: Piecing together siloed tools for HIPAA and FINRA can result in inefficiencies and redundancies.

Organizations tackling dual compliance need tools that unify these workflows.

A Practical Approach to Handling FINRA and HIPAA Compliance

Here’s how software teams can enhance their compliance posture while handling the nuances of both FINRA and HIPAA:

1. Centralized Data Management

Consolidate financial and healthcare data into a single, secure repository with clear access controls. This makes monitoring easier and reduces redundancy.

2. Integrated Monitoring and Reporting

Deploy logging and monitoring tools that can generate unified reports for both FINRA and HIPAA. This ensures alignment across audit trails.

3. Automation of Compliance Workflows

Leveraging automation reduces the manual effort required for incident response, access tracking, and record retention. Automation also prevents human error.

4. Vendor Assessment Tools

Evaluate third-party vendors using streamlined evaluation workflows to confirm adherence to both FINRA and HIPAA.

Simplify Compliance with the Right Toolset

Manually weaving together compliance measures for FINRA and HIPAA can leave teams overwhelmed and exposed to risk. With unified solutions, teams can go from addressing overlapping concerns to implementing robust, automated compliance systems.

At hoop.dev, we understand these challenges and provide tools that help engineering teams focus on building software without sacrificing regulatory requirements. Experience how you can simplify dual compliance for FINRA and HIPAA in just minutes. See it live today!