FINRA's NAC Strengthens Sanction Guidelines for Fraudulent Conduct

WASHINGTON – The Financial Industry Regulatory Authority (FINRA) today announced that the National Adjudicatory Council’s (NAC) review of its Sanction Guidelines has resulted in a number of significant revisions. In particular, the NAC is amending the overarching principles that apply to sanctions determinations and is revising the Sanction Guidelines to call for tougher sanctions against those who commit fraud or make unsuitable recommendations to customers. The revised Sanction Guidelines now advise FINRA adjudicators to strongly consider barring an individual respondent, or expelling a firm, for cases involving fraud. For individuals who violate FINRA’s suitability rule, the range of the suspension has increased from one year to two years, and adjudicators are advised to strongly consider barring an individual respondent where aggravating factors predominate over mitigating ones.

The NAC first published the Sanction Guidelines in 1993 to familiarize member firms with some of the typical securities industry rule violations that occur, and the range of disciplinary sanctions that may result from those rule violations. The NAC is FINRA’s appellate tribunal for disciplinary cases. It is a 14-member committee composed of equal numbers of industry and non-industry members. While the Sanction Guidelines are not meant to prescribe fixed sanctions for particular violations, the goal is to assist FINRA’s adjudicators – Hearing Panels and the NAC – in imposing appropriate sanctions consistently and fairly in disciplinary proceedings. FINRA’s Departments of Market Regulation and Enforcement also consult the Sanction Guidelines in determining the appropriate level of sanctions to seek in settled and litigated cases.  

The NAC is also revising the Sanction Guidelines’ General Principles. The amended Sanction Guidelines emphasize that FINRA’s disciplinary system should be designed to protect the investing public, deter misconduct and uphold high standards of business conduct. The amendments underscore FINRA’s policy of imposing progressively escalating sanctions on registered representatives and firms that engage in a pattern of similar misconduct or evidence a reckless disregard for regulatory requirements, investor protection or market integrity.

The revised Sanction Guidelines outlined in Regulatory Notice 15-15 are effective immediately and available on FINRA’s website.

FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business—from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, and informing and educating the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.