The Financial Industry Regulatory Authority (FINRA) oversees broker-dealers and exchanges, working to protect investors and ensure market integrity. As part of its regulatory duties, FINRA can impose sanctions on firms and individuals for violations of securities rules and regulations. These sanctions aim to be remedial and deter future misconduct.
FINRA sanction guidelines are the framework that provides disciplinary sanctions that may result from various rule violations. However, the sanction guidelines are not absolute. Adjudicators consider the specific facts and circumstances of each case to determine appropriately remedial sanctions.
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Overview of the Revised FINRA Sanction Guidelines
FINRA recently released Regulatory Notice 22-20 announcing revisions to the FINRA Sanction Guidelines. These revisions aim to ensure the guidelines accurately reflect the levels of sanctions imposed in FINRA disciplinary proceedings.
Some key changes in the revised sanction guidelines include:
- Separate fine ranges for small firms and mid-size or large-size firms
- Removing the upper limit of fine ranges for mid-size and large-size firms for certain serious violations
- Increasing the minimum low end of fine ranges to $5,000 for small firms
- Adding Anti-Money Laundering (AML) guidelines
- Providing more guidance on non-monetary sanctions for firms
- Creating guidelines specifically applicable to individuals
Understanding FINRA Disciplinary Actions and Sanctions
When FINRA enforcement staff believe an individual or firm violated securities rules and regulations, they may initiate a disciplinary action. Common sanctions imposed on respondents found to have committed violations include:
Fines make up one of the most common sanctions levied by FINRA. The revised sanction guidelines include increased fine ranges, especially for mid-size and large-size firms committing serious violations. Fines aim to punish past misconduct and deter future violations.
FINRA can suspend an individual or firm from associating with any FINRA member for a period of time. Suspensions temporarily bar participation in the securities industry.
FINRA may permanently bar an individual or firm from associating with any FINRA member through an industry-wide bar. Bars remove a respondent’s ability to conduct securities business.
In addition to fines, suspensions, and bars, the revised sanction guidelines provide expanded guidance to adjudicators on imposing non-monetary sanctions for firms. These can include:
- Requiring retention of an independent consultant
- Mandating heightened supervision or certifications
- Restricting business activities or product lines
- Suspending opening of new customer accounts
Non-monetary sanctions aim to directly address compliance failures.
Adjudicators determine appropriate sanctions based on the facts of each case, guided by the sanction guidelines. They consider aggravating and mitigating factors, disciplinary history, nature of the violations, and other circumstances.
While sanctions aim to be remedial, they can carry severe consequences. Respondents may face reputational damage, limits on their ability to conduct business, and substantial fines. It’s imperative for firms and associated persons to understand the potential disciplinary outcomes that can result from securities violations.
How My RIA Lawyer Can Help
Navigating FINRA investigations and disciplinary actions presents complex regulatory challenges. The experienced FINRA arbitration attorneys at My RIA Lawyer represent individuals and firms responding to FINRA sanctions and allegations. We provide seasoned guidance tailored to the specific facts and circumstances of your matter. Whether before FINRA or on appeal, we advocate aggressively on your behalf. Don’t go it alone – leverage our expertise to achieve the most favorable outcome possible.empowering financial advisors and firms to conquer the legal challenges of the ria universe.
To discuss your situation in confidence, contact our team for a free consultation. We’re here to help you understand the FINRA disciplinary process and protect your interests.