U.S. Court Curbs FINRA’s Disciplinary Powers

The Times notes that T. Grant Callery, FINRA’s general counsel, said the organization would “continue to review the ruling and weigh our options.” But he insisted the decision would not affect the self-regulatory group’s “ability to enforce FINRA rules and securities laws, to discipline firms or protect investors.”

While The Times reported that some securities law experts say the ruling “neuters” FINRA, Brian Rubin, a partner in the law firm Sutherland Asbill & Brennan’s Washington office, who’s a member of the firm’s Litigation Practice Group, and represents broker-dealers and investment advisors, told AdvisorOne that he doesn’t think the case “is as significant as it’s being portrayed.”

The Times article, he said, missed the fact that “for the past several years, FINRA’s Sanction Guidelines have discouraged ordering fines if a rep is barred. Therefore, under the current procedures, there probably wouldn’t have been a fine ordered against Fiero.” Added Rubin: “I think it’s a matter of resources. FINRA wants to stop wrongdoers from continuing to act. FINRA has a broader mission than simply imposing fines. In addition, reps who are suspended (as opposed to barred) and fined aren’t allowed to return to the industry until they pay the fine. The decision doesn’t impact that.”

As for how the decision may impact the Securities and Exchange Commission’s power, Rubin said, “The SEC has its own statutes.”

With regard to the proposed new self regulatory organization for advisors—and FINRA taking on that SRO role—Rubin says this decision will have “minimal or no impact.” At this point, “we don’t know how [any SRO] legislation will shape up, and whether there will be a mechanism for the new SRO to collect fines. The decision doesn’t affect FINRA’s current status as the leading candidate to become the SRO.”