FINRA’s NAC Revises Sanction Guidelines in Effort to Mitigate Fraud

The Financial Industry Regulatory Authority (FINRA), the largest independent regulator for all securities firms in the US, has announced a number of paramount revisions to its Sanction Guidelines, according to a FINRA statement.

The impetus behind the revisions of FINRA’s Sanction Guidelines stemmed from a review from the National Adjudicatory Council’s (NAC). The NAC has been publishing Sanction Guidelines since 1993 in a bid to familiarize member firms with common securities industry rule violations that occur and consequent disciplinary actions.

The NAC itself is FINRA’s appellate tribunal for disciplinary cases, which is comprised of a 14-member committee of equal numbers of both industry and non-industry members. With regards to its most recent review of the Sanction Guidelines, the NAC is amending the greater principles that apply to sanctions determinations.

This includes the outright revision of the Sanction Guidelines to call for more stringent sanctions against market participants committing fraud, along with those who solicit unsuitable recommendations to customers.

As a result, the revised Sanction Guidelines now strongly advise FINRA adjudicators to contemplate obstructing an individual respondent, or expelling a firm, for cases involving fraud. Moreover, for those individuals who violate FINRA’s suitability rule, the range of the suspension has been increased two-fold, to two years.

FINRA’s revised Sanction Guidelines can be read in their entirety by accessing the following link.