SEC Approves FINRA Rule to Strengthen Regulation of Rogue Firms

Posted on August 9th, 2021 at 12:05 PM
SEC Approves FINRA Rule to Strengthen Regulation of Rogue Firms

From the Desk of Jim Eccleston at Eccleston Law:

The Securities and Exchange Commission (SEC) has approved a Financial Industry Regulatory Authority (FINRA) rule created to increase regulation of brokerage firms that have a history of misconduct or employ a high number of advisors with disciplinary records. The rule requires high-risk firms to deposit cash or qualified securities into an account, which will be managed by FINRA. High-risk firms cannot withdraw the cash or securities absent FINRA’s consent and the funds may be used to cover potential arbitration awards or settlements. According to the SEC’s order, restricted firms would be categorized based on having “significantly higher levels” of disciplinary issues and sales practice violations compared to other similarly sized firms. 

A restricted firm can challenge the designation and is provided a “one-time opportunity” to avoid penalties “by voluntarily reducing its workforce”, according to the order. The SEC order noted FINRA cited academic studies, which indicated “some firms persistently employ registered representatives who engage in misconduct, and that misconduct can be concentrated at these firms.” FINRA originally proposed the rule in 2019 prior to filing the measure with the SEC in November 2020. The rule takes effect in six months.

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

Tags: eccleston, eccleston law, sec, finra, rogue firms

Return to Archive

TESTIMONIALS

Previous
Next

 


It was really fun seeing you fight for us. You have an amazing way of thinking out of the box.


 

Beth M.

LATEST NEWS AND ARTICLES

February 11, 2025
UnitedHealth Group Agrees to $69 Million Settlement in ERISA Class Action Lawsuit

UnitedHealth Group has agreed to pay $69 million to resolve a class action lawsuit alleging violations of its fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA).

February 10, 2025
Former Merrill Lynch Advisor Sanctioned by FINRA for Unauthorized Trades

FINRA has fined Anthony J. Seifert, a former Merrill Lynch advisor based in Mount Pleasant, South Carolina, $5,000 and suspended him for 20 days.

February 7, 2025
Court Finds American Airlines Breached Fiduciary Duty in 401(k) ESG Case

A federal court ruling against American Airlines has brought attention to the role of environmental, social, and governance (ESG) factors in managing retirement plans.