Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Regulation and Compliance > Federal Regulation > FINRA

FINRA Doubles Length of Suitability Suspensions, Toughens Fraud Sanctions

Your article was successfully shared with the contacts you provided.

The Financial Industry Regulatory Authority said Tuesday that it will call for tougher sanctions for those who commit fraud or make unsuitable recommendations to clients. Plus, it will increase suspensions under the self-regulator’s suitability rules from one year to two years.

FINRA said that its National Adjudicatory Council is amending its “overarching principles” that apply to sanctions determinations and is revising its Sanction Guidelines to advise FINRA adjudicators to “strongly consider” barring an individual respondent or expelling a firm for cases involving fraud.

For individuals who violate FINRA’s suitability rule, the range of the suspension has increased from one year to two years, and FINRA states that adjudicators are advised to “strongly consider barring an individual respondent where aggravating factors predominate over mitigating ones.”

FINRA released the revised Sanction Guidelines, which are effective immediately, in Regulatory Notice 15-15. The NAC, FINRA’s appellate tribunal for disciplinary case, first published the Sanction Guidelines in 1993 to familiarize member firms with some of the typical securities industry rule violations that occur and the range of disciplinary sanctions that may result from such violations.

The NAC is a 14-member committee composed of equal numbers of industry and non-industry members.

“While the Sanction Guidelines are not meant to prescribe fixed sanctions for particular violations, the goal is to assist FINRA’s adjudicators – Hearing Panels and the NAC – in imposing appropriate sanctions consistently and fairly in disciplinary proceedings,” FINRA states in the release announcing the changes.

FINRA’s Market Regulation and Enforcement Departments also consult the Sanction Guidelines when determining the appropriate level of sanctions to seek in settled and litigated cases. In addtion, the NAC is revising the Sanction Guidelines‘ General Principles to emphasize that FINRA’s disciplinary system should be designed to protect the investing public, deter misconduct and uphold high standards of business conduct.

The amendments underscore FINRA’s policy of imposing “progressively escalating sanctions” on registered reps and firms that engage in a pattern of similar misconduct or evidence a reckless disregard for regulatory requirements, investor protection or market integrity, FINRA states.  

— Check out FINRA Arb Panel Grants $500K to Ex-Morgan Stanley Rep on ThinkAdvisor.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.