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Who Wants To Know What FINRA Has Planned For Your CRD

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

idea.jpgThe Financial Industry Regulatory Authority (FINRA) recently announced that it expects to send a proposal to the SEC to make it easier for registered representatives to clear their record of black marks.  Up until now, the process for expungement has been drawn out and extremely limited in application.

The primary issue FINRA is attempting to address are the adverse marks of customer claims that are only brought against the firm.  As currently framed, a registered person’s U-4 must be marked even if not a party, but named in the body of the complaint.  I suspect that FINRA is looking to change this aspect of the reporting requirement.

This practical proposal would address those unfair situations where the registered person sold an investment that the firm promoted as safe, which later turned out to be untrue; i.e. auction rate securities.  In other words, the registered person should not be punished for selling the product his or her firm recommended.

The proposal is sure to meet opposition from groups who represent claimants in arbitrations.  Nevertheless, I believe that the proposal will gain some traction because it fairly balances the interests of registered persons unfairly having their record marked and, at the same time, reporting of those who are named parties in claims.