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FINRA Announces Plans to Crack Down on Broker Misconduct

Simms Law, P.C. June 14, 2022

The Financial Industry Regulatory Authority (“FINRA”) recently announced plans to crack down on broker misconduct. In Regulatory Notice 21-09, the self-regulatory organization announced that new rules will address brokers with a significant history of misconduct and their employers. FINRA’s hope is that these rule amendments will increase protection for investors. Specifically, FINRA plans to make the following amendments to its existing rules: 

  • Rule 1000 Series (Member Application and Associated Person Registration): These rules require a member firm to file a continuing membership application when a person seeking to become a control person, owner, principal, or registered person of the member firm has a specific number of final criminal matters or specified risk events in the previous five years. This rule amendment becomes effective September 1, 2021.

  • Rule 9200 Series and Rule 9300 Series (Disciplinary Proceedings/Review of Disciplinary Proceeding by National Adjudicatory Council and FINRA Board; Application for SEC Review): These rules authorize hearing officers to impose conditions and restrictions on disciplined respondents, and they require firms to adopt supervision plans regarding disciplined respondents. This rule amendment becomes effective April 15, 2021. 

  • Rule 9556 (Failure to Comply with Temporary and Permanent Cease and Desist Orders): This rule grants FINRA the authority to initiate an expedited proceeding against a respondent that fails to comply with restrictions and conditions imposed by hearing officers. The rule also creates the process for this expedited proceeding. This rule amendment becomes effective April 15, 2021. 

  • Rule 9522 (Initiation of Eligibility Proceeding; Member Regulation Consideration; and Requirements for an Interim Plan of Heightened Supervision): This rule requires a firm that files an application to continue its association with a disqualified person. This includes a requirement that the firm implement an interim heightened supervision plan to remain in effect throughout the application review process. This rule becomes effective June 1, 2021. 

  • Finally, Rule 8312 (FINRA BrokerCheck Disclosure) requires FINRA to release a list of “taping firms” through BrokerCheck, which are member firms that have a specified percentage of registered persons who’ve been associated with disciplined firms in a registered capacity in the previous three years. This rule becomes effective May 1, 2021. 

The above rule changes also apply to capital acquisition brokers, and FINRA amended Rule 111 and Rule 900(b) to reflect this. 

Fort Lauderdale Investor Representation Attorney 

At Simms Law, P.A., it is our belief that financial advisors and brokers must always act in the best interests of their clients. In fact, financial professionals are legally obligated to act in the best interests of their clients. So, when financial professionals fail to do what is best for their clients, we believe they should face consequences for their actions, part of which includes compensating their clients for financial losses. If you have lost money due to the improper actions of your broker or financial advisor, please contact us today for a consultation.