Should Broker-Dealers Self-Report?


Law360, New York (May 19, 2010) -- If a firm discovers a problem, should it self-report (assuming no regulatory obligation to do so)? Will it receive sufficient credit for self reporting or is it just ensuring that it will be the subject of an enforcement action?

In an attempt to answer these questions, the Securities and Exchange Commission in January 2010 announced revisions to its Enforcement Manual and an initiative aimed at encouraging cooperation in investigations or voluntarily disclosure of past or potential violations of the securities laws by companies and individuals.[1] In an effort to make its program more effective and efficient, the SEC’s Director of the Division of Enforcement announced these initiatives as “potential game-changers” for its enforcement and investigatory goals.

Previously, in November 2008, FINRA released its policies through Regulatory Notice 08-70, which stated that “extraordinary cooperation” in FINRA investigations would be considered in determining the level of sanctions imposed or disciplinary action taken for violations. The Notice described the types of cooperation FINRA would consider as worthy of credit. At that time, FINRA stated that its goal was to “increase transparency as to the basis for sanctions imposed in cases and to encourage firms to root out, correct and remediate violative behavior.”

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