FINRA Changes Sanctions Guidelines on Several Key Issues

The Financial Industry Regulatory Authority (FINRA), a self-regulatory agency, has updated its sanctions guide to ensure in-house judges consider whether broker-dealers took advantage of elderly or vulnerable clients when making their rulings. The agency also expanded its guidance related to how judges should adjust penalties when sanctions have been imposed by other federal agencies, in addition to FINRA.

Moving forward, all FINRA officers will review if and how respondents used their influence over customers, especially senior citizens. It’s part of an effort from the agency to better protect older adults, who statistics show are more likely to be taken advantage of in an investment scenario.

In addition to this measure, FINRA will implement the following:

• Changes to how judges consider other enforcement agencies’ penalties when issuing penalties specific to FINRA
• An adjustment to the agency’s penalty guide, creating three new guidelines related to specific forms of rule breaking
• A notable increase in the penalties issued for selling unregistered securities in which a large volume of “penny stock” transactions take place
• An increase in penalties for broker-dealers who were engaged in dubious transactions on a client’s account to generate greater fees and commissions (known as “churning”)

This is the first time FINRA has updated its sanction guidelines since 2015. At that time, the agency implemented more stringent penalties for those engaged in fraud, encouraging judges to expulse the most serious violators of federal regulations.

If you are aware of FINRA violations or other significant violations of federal law happening within your business or organization, you may have certain whistleblower protections available to you. For further guidance, meet with a knowledgeable Dallas attorney at Whistleblower Law for Managers.