The Financial Industry Regulatory Authority’s recently proposed rule to put restrictions on brokerage firms that employ brokers with a history of misconduct will, if adopted, impact “less than 2%” of broker-dealer firms, FINRA CEO Robert Cook said Wednesday.
Cook, speaking during a question and answer session at FINRA’s annual conference, said that while the broker-dealer self-regulator has been focused on reining in high-risk brokers for some time, the proposed Rule 4111 “is more focused on firms.”
Regulatory Notice 19-17, released on May 2, details FINRA’s plan to adopt Rule 4111, which would impose obligations on broker-dealers that have significantly higher levels of risk-related disclosures than similarly sized peers. FINRA is seeking comment until July 1.
The new rule proposal identifies firms “that have a cluster of brokers with a high level of misconduct in the firm,” Cook said, adding that “relative to your peer group, you’re way out on the tail” regarding the number of misconduct events.