New FINRA Rule Reining In Rogue Brokerages Becomes Effective

Posted on January 5th, 2022 at 1:47 PM
New FINRA Rule Reining In Rogue Brokerages Becomes Effective

From the Desk of Jim Eccleston at Eccleston Law:

The Financial Industry Regulatory Authority (FINRA) adopted a new rule in 2020 that is designed to rein in rogue brokerage firms. 

The new rule, which became effective on January 1, enables FINRA to impose additional capital obligations and other conditions on brokerage firms that employ a substantial number of advisors with disciplinary histories. Pursuant to the new rule, FINRA can mandate that a “restricted firm” deposit cash or qualified securities into a FINRA-controlled account. The deposited funds may be used to cover unpaid arbitration awards, according to FINRA. FINRA’s new rule was approved by the Securities and Exchange Commission (SEC) in July 2020. 

FINRA annually will review whether a brokerage qualifies as a “restricted firm” primarily by analyzing the number of firm-level and individual-level regulatory disclosures. A “restricted firm” will also be given the opportunity to avoid the classification by voluntarily reducing its workforce and providing an explanation as to why the firm should not receive the designation. While it is not clear how many firms will receive the “restricted firm” classification, FINRA noted that the initial number would likely be small.

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.

Tags: eccleston, eccleston law, finra

Return to Archive

TESTIMONIALS

Previous
Next

Thank You from the bottom of our hearts for all you have done for us. When we realized this was a very bad investment - we did not know where to turn for help. Then we received your name. When we called you - you were so kind to us and then agreed to help us. For this we are so very grateful. The world would be a much nicer place if there were more people like the two of you in it. We will always remember all the help and kindness you have shown us. Thank you so very very much for everything.

Wayne and Judy S.

LATEST NEWS AND ARTICLES

September 5, 2025
Merrill Lynch Advisor Faces FINRA Disciplinary Action for Refusing to Cooperate with Investigation

The Financial Industry Regulatory Authority (FINRA) has initiated disciplinary proceedings against former Merrill Lynch broker Ali F. Chehab of Portland, Oregon. According to ThinkAdvisor, FINRA alleges that he refused to cooperate in an investigation into potential misconduct, including unauthorized trading and material misrepresentati...

September 4, 2025
Wells Fargo Ties $2,000 Bonus to Non-Solicitation Clause, Raising Advisor Concerns

Wells Fargo & Co. recently issued a $2,000 bank-wide award to its 215,000 employees, following the Federal Reserve’s June decision to lift its asset growth restrictions.

September 3, 2025
Kansas City Advisory Firms Agree to $25.5 Million Settlement Over No-Poach Allegations

Mariner Wealth Advisors, along with two other Kansas City-area firms, has agreed to a $25.5 million class action settlement over allegations that they illegally agreed not to solicit each other’s advisors.