FINRA is stepping up its position on sanctions with recommendations for stricter guidelines. What reasons do they have?
The regulatory mission of FINRA is to protect investors and strengthen market integrity through self-regulation. By emphasizing self regulation, FINRA infuses balance into the regulatory process. But, what is a regulatory authority to do when firms continue to engage in reckless and intentional misconduct? Impose stronger sanctions.
Increased punishment is key to how FINRA plans to deal with firms that continually miss the mark in reporting and compliance requirements. The 2015 stance is that sanctions should be “significant enough to achieve deterrence, and not a mere cost of doing business.” Is your firm prepared to deal with the complex rules and increased cost of fines?
FINRA has published the Sanction Guidelines so members, associated persons, and counsel can become familiar with the types of disciplinary actions that may be applicable to various cases. The guidelines are not intended to be absolute, but are intended to provide direction for imposing fines. The guidelines infer that firms may fall above or below standard guidelines in their failure to procedures, and that sanctions should be applied fairly based on aggravating or mitigating factors.
Aggravating factors can include:
- Prior disciplinary actions
- A pattern of misconduct
- Ignoring red flags and warnings from regulators
- Attempts to delay FINRA’s investigation, or conceal or mislead
While, mitigating factors may include:
- Accepting of responsibility
- Substantially assisting FINRA in its investigation
- Demonstrating the misconduct was not typical of the firm’s compliance history
- Reasonable reliance on competent legal or accounting advice