FINRA Updates Sanction Guidelines by Eliminating Suggested Fine Cap
From the Desk of Jim Eccleston at Eccleston Law.
The Financial Industry Regulatory Authority (FINRA) has updated its sanction guidelines used to determine the level of fines or penalties to impose on firms and their financial advisors.
However, the changes are primarily symbolic because the guidelines served only as an outline of potential penalties and typically was not closely followed, according to sources familiar with the matter. For instance, FINRA’s September 2022 guidelines removed a suggested upper limit of $310,000 on fines. Nevertheless, FINRA has regularly imposed fines in excess of that amount, such as a record $70 million penalty against Robinhood Financial.
Furthermore, FINRA is increasing the minimum fine amount to $5,000 and designing separate rules to adjust fines based on firm size. For example, when a firm has failed to properly supervise an advisor’s outside business activity (OBA), FINRA recommends that a small firm ought to pay fines between a range of $5,000 and $77,000. On the other hand, FINRA suggests that a midsize or large firm should pay between $10,000 and $200,000. The revised guidelines should address “pet peeves” of small firms that were being unfairly grouped in with larger firms, according to sources familiar with the matter.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.
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