FINRA’s 2011 enforcement record, priorities, and trends

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Originally published in the Journal of Investment Compliance, September 2012.

Abstract -

Purpose - The paper’s aim is to describe a recent increase in FINRA enforcement activity and to discuss how broker-dealers and representatives may want to prepare themselves for FINRA’s increasing willingness to sanction members in the wake of the recent financial crisis. Design/methodology/approach - The paper analyzes FINRA’s recent enforcement record, including trends over the past several years in disciplinary actions and fines. It also discusses FINRA’s top enforcement issues in 2011; advertising, short selling, auction rate securities, and suitability; and recommends increased compliance efforts in light of FINRA’s growing aggressiveness.

Findings - It is important that firms and representatives understand how the priorities of this self-regulatory organization have changed since the financial crisis, fueling this recent growth in FINRA enforcement activity. Originality/value - The paper offers practical guidance from experienced financial services lawyers.

Keywords - Financial institutions, United States of America, Enforcement, Broker dealer, Registered representative, Law enforcement.

Paper type - Technical paper.

After a substantial decline in FINRA enforcement activity in the years immediately preceding the recent financial crisis, broker-dealers (BDs) and registered representatives are faced with a potentially daunting new reality: an active regulator that is bringing a lot more cases and imposing a lot more fines. Since 2008, the number of disciplinary cases filed by FINRA annually has jumped nearly 39 percent and the fines levied have increased by 143 percent.

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Published In: Administrative Agency Updates, Finance & Banking Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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