U.S. securities regulators are seeking tougher penalties for reps and brokerage firms that are involved with fraud, and they are toughening the penalties for suitability violations.
The Financial Industry Regulatory Authority (FINRA) said Tuesday that a review of its sanction guidelines by its National Adjudicatory Council (NAC) has resulted in a number of significant revisions to both the principles that apply to sanctions decisions and the guidelines themselves. The revisions are designed to result in tougher sanctions against those who commit fraud or make unsuitable recommendations to customers, FINRA says.
The U.S. self-regulatory organization reports that the revised sanction guidelines now advise adjudicators to “strongly consider” banning individuals, or expelling firms, for cases involving fraud.
For individuals that violate the suitability rules, the range of the suspension has increased from one year to two years; and, it reports that adjudicators are also advised to strongly consider banning individuals in cases where aggravating factors outweigh mitigating circumstances.
The council is also revising the general principles underlying its sanction guidelines to stress that the disciplinary system should aim to protect investors, deter misconduct, and uphold high standards of conduct. FINRA says that the amendments underscore its policy of imposing progressively tougher sanctions on registered reps and firms that engage in a pattern of similar misconduct; or where there is evidence of a reckless disregard for regulatory requirements, investor protection, or market integrity.
The NAC is FINRA’s appeal tribunal for disciplinary cases. It is a 14-member committee composed of an equal number of industry and non-industry members. Its sanction guidelines are intended to assist adjudicators – both hearing panels and the NAC – in imposing sanctions that are fair, consistent and appropriate in disciplinary cases.
The revised guidelines are effective immediately.