The board of the Financial Industry Regulatory Authority (FINRA) recently moved to increase disclosures from firms and brokers that fail to pay arbitration awards and to strengthen the sanctions they place on brokers with disciplinary histories and the firms that hired them.
These proposals will allow for the restriction of firm and broker activity while cases are on appeal, allow for increased penalties against brokers with certain infractions, and require firms to increase their supervision when a broker appeals a hearing decision or while a disqualification request is under review.
A separate proposal will require firms to publically disclose whether or not conversations between customers and their brokers need to be recorded because a significant percentage of their brokers previously worked at disciplined firms. The challenge of dealing with brokers who are repeatedly disciplined has been a longstanding issue for the regulatory body, but FINRA hopes these changes can help them push back.
“These actions will build on FINRA’s extensive existing programs to address high-risk brokers and reflect our commitment to protect investors and promote public confidence in securities firms and markets,” FINRA president and chief executive Robert Cook said in a statement.
FINRA also proposed that customers have the ability to withdraw their arbitration case when a broker or firm becomes inactive while their case is pending and refile it in court.
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