The Financial Industry Regulatory Authority’s National Adjudicatory Council has revised the principal considerations in its Sanction Guidelines to allow adjudicators to take a principles-based approach in assessing if rule violations have more impact on older or impaired customers, including the customer’s ability to recover from sustaining financial losses.
The revision, effective immediately “is consistent with FINRA’s view that certain investors may need additional protections,” Brian Rubin, partner at Eversheds Sutherland in Washington, told ThinkAdvisor in an email. “More stringent sanctions against those who are the most vulnerable helps FINRA send that message.”
As FINRA explains in Regulatory Notice 20-37, the Sanction Guidelines assist FINRA’s adjudicators in determining the appropriate sanctions in disciplinary proceedings.
The central idea contained in the guidelines, FINRA states, “is that adjudicators start with a range of appropriate sanctions for a particular violation and consider aggravating and mitigating factors in order to arrive at an appropriate sanction for the particular circumstances.”
FINRA has also filed with the Securities and Exchange Commission to amend the bylaws to further align the grounds for member removal from the National Adjudicatory Council with an existing provision in the bylaws related to the removing a FINRA governor from the FINRA Board of Governors.
FINRA notes that the voting threshold for removal of a NAC member differs from that of a governor. The former requires a majority vote of the FINRA Board, while the latter requires a two-thirds vote.