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By: Ted Peters
In further response to mounting pressure for securities regulators to exert greater control over problem brokers, the Financial Industry Regulatory Authority (“FINRA”) released Regulatory Notice 18-17 on May 2, 2018. FINRA has long maintained a “rulebook” of sorts to guide adjudicators in disciplinary proceedings when addressing the propriety and scope of sanctions that might issue. Akin to sentencing guidelines, the Sanction Guidelines “provide both general principles that apply to the overall process of determining sanctions for every case and specific recommendations of a range of sanctions for particular rule violations.”
The stated goal of the guidelines is “to assist FINRA’s adjudicators in determining the appropriate sanctions in disciplinary proceedings and to provide consistency in the imposition of sanctions.” Such sanctions can include fines, suspensions or industry bars.
This most recent Notice trumpets FINRA’s revisions to the guidelines to instruct adjudicators “to consider customer-initiated arbitrations that result in adverse arbitration awards or settlements when assessing sanctions.” More specifically, FINRA adjudicators are now expressly instructed to consider imposing more serious sanctions when there is a discernible “pattern” considering a respondent’s disciplinary history, and history or arbitration awards.
“By enabling adjudicators to consider arbitration settlements and adverse arbitration awards, in addition to the traditionally considered final disciplinary actions, the Sanction Guidelines will allow adjudicators to take such settlements and awards into account in appropriate cases when determining whether a pattern of harm to investors or market integrity, or disregard of regulatory requirements exists.”
The Sanction Guidelines apply only to enforcement actions, not FINRA arbitrations. The revisions go into effect on June 1, 2018.
If you have questions or would like more information, please contact Ted Peters at firstname.lastname@example.org.