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Regulation and Compliance > Federal Regulation > FINRA

FINRA Updates Sanction Guidelines to Include Vulnerable Individuals

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The Financial Industry Regulatory Authority said Monday that its National Adjudicatory Council has introduced new Sanction Guidelines that includes coverage for financial exploitation of vulnerable individuals or individuals with diminished capacity.

It also includes three new guidelines relating to systemic supervisory failures, borrowing and lending arrangements, and short interest reporting.

The NAC, via Regulatory Notice 17-13, also revised the guidance concerning sanctions imposed by other regulators, indicating that these sanctions may be considered as “mitigating factors.”

The revised Sanction Guidelines are effective immediately.

The NAC is FINRA’s appellate tribunal for disciplinary cases and is a 15-member committee composed of industry and non-industry members.

The Securities and Exchange Commission approved last June FINRA’s request to add another public member to its NAC, increasing the NAC’s total membership from 14 to 15.

As FINRA explains, the Sanction Guidelines do not prescribe fixed sanctions for particular violations, and are intended to assist FINRA’s adjudicators — hearing panels and the NAC — in imposing appropriate sanctions consistently and fairly in disciplinary proceedings. The NAC last updated the guidelines in May 2015.

The guidelines are also used by FINRA’s market regulation and enforcement divisions to determine the appropriate level of sanctions to seek in settled and litigated cases.

In late March, FINRA announced that two new rules will kick in next year to protect senior investors. Starting in February, firms will have to “make reasonable efforts” to get the name and associated information for a “trusted contact person for a customer’s account” and will be allowed to put temporary holds on the release of funds or securities “when there is reasonable belief of financial exploitation,” FINRA said. 

— Check out FINRA’s 6 Steps to Recovery for Fraud Victims on ThinkAdvisor.


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