Compliance and Regulatory Alerts  |  09-14-21

FINRA Rules Addressing Brokers with Significant History of Misconduct Go Into Effect

FINRA Rules Addressing Brokers with Significant History of Misconduct Go Into Effect

New FINRA rules for protecting investors from brokers with a significant history of misconduct went into effect on September 1, 2021 (see prior Bates coverage). 

The new rules, adopted on March 10, 2021, broaden authority to discipline associated persons, impose stricter supervision on firms, and mandate greater disclosure in various proceedings. The new rules include (i) allowing a hearing officer to impose “conditions or restrictions” on activities of an associated person and requiring heightened supervisory procedures during an appeal to the National Adjudicatory Council; (ii) mandating disclosure when a firm is subject to the Taping Rule (“Tape Recording of Registered Persons”) through FINRA’s BrokerCheck system; and (iii) requiring that firms adopt heightened supervisory procedures for statutorily disqualified brokers during an eligibility review and submit written requests for materiality consultations and approval through FINRA’s Department of Member Regulation before hiring any person who has “final criminal matters” or two “specified risk events” during the previous 5 years when seeking to become an owner, control person, principal, or registered person of the firm.

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