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Securities Compliance Sentinel Analysis of cutting-edge securities industry issues

Who Wants To Know About Enhanced FINRA Discipline

Posted in Broker-Dealer Regulation, Financial Industry Trends, FINRA Compliance, FINRA Enforcement

confusion.jpgA recent study by the Sutherland Asbill law firm revealed that FINRA brought 4% more disciplinary cases in 2012 as compared to 2011.  In doing so, FINRA jacked up its fines another 15%, for a grand total of $78 million.

Besides FINRA showing it still has muscle to flex, what should member-firms take away from this development.  For one, it is important to look at the areas of particular focus for FINRA.

Topping the list of enforcement actions were cases that involved suitability and due diligence; these cases totaled 117 and 62, respectively.  So what should member firms take from this heightened focus on suitability and due diligence.

Firms should take this opportunity to review its policies and procedures when it comes to suitability and knowing your customer.  I have prepared guidebooks that you might find helpful in this regard.

The key to any risk avoidance program is documentation.  Make sure your policies and procedures are well-documented.  In turn, make sure your registered representatives fully document their suitability analysis and due diligence.

Having robust documentation is not a gurantee that FINRA will not come a knocking.  If they do, well-documented policies, procedures, suitability and due diligence will go a long way to avoiding the hammer.

* photo from freedigitalphotos.net