FINRA tackles the problem of repeat offenders

Brokers with a history of misconduct and the firms that employ them are facing new measures from the U.S. Financial Industry Regulatory Authority (FINRA).

FINRA has adopted a series of new rules designed to tackle the problem of serial offenders in the U.S. brokerage business and bolster investor protection.

Among other things, the new rules allow the self-regulatory organization to impose restrictions on the activities of a firm or rep, as well as require heightened supervisory procedures for recidivist reps, when disciplinary proceedings are being appealed.

“Conditions and restrictions will help protect investors by potentially preventing associated persons and firms found to have violated a statute or rule from engaging in additional misconduct during the appeal process,” FINRA said in a notice outlining the rules.

The SRO has also revised its rules to enhance investor protection while it’s reviewing an eligibility application. The changes include new obligations on firms that “seek associations” with people that have a history of misconduct.

“Given recent studies that provide evidence of the predictability of future regulatory-related events for brokers with a history of past regulatory-related events, FINRA has been concerned about instances where a member firm on-boards brokers with a significant history of misconduct,” the SRO said.

The latest rule changes are part of an ongoing effort by the SRO to “strengthen its tools for responding to brokers with a significant history of misconduct” and the firms that hire those brokers, it said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.