FINRA Announces NAC Revisions to Sanction Guidelines

The Financial Industry Regulatory Authority (FINRA) is an independent regulatory body in charge of overseeing the practices and activities of covered financial firms, brokers, and other parties. National Adjudicatory Council (NAC) is FINRA’s main appellate tribunal. NAC is comprised of a 15-member panel and can provide guidance regarding FINRA rule violations and the potential disciplinary consequences that can be imposed for such acts.

Guidance provided by NAC includes the  Sanction Guidelines publication. While the publication does not set forth concrete or definitive penalties, the penalty ranges it sets forth are intended to guide an appropriate penalty based on the violation and surrounding circumstances.

Understanding the FINRA Sanction Guidelines is one of the first steps in understanding the potential consequences a client complaint or litigation can create. Working with an attorney who is experienced in the handling FINRA disciplinary proceedings under the guidelines can help you approach the matter strategically. Attorney William Heyman has more than 20 years of experience representing brokers, financial advisors, fiduciaries, and others in FINRA proceedings. To schedule a confidential consultation, call the Heyman Law Firm at (410) 305-9287.

General Principles Guiding FINRA Sanctions

FINRA’s disciplinary standards are intended to protect the investing public by deterring misconduct and upholding high standards of business conduct. There are several general concepts that apply to all disciplinary proceedings. These include:

• Penalties are tailored to the conduct and circumstances.
• Subsequent additional instances of misconduct are punished more harshly than a first-time offense.
• Certain offenses can be aggregated for purposes of determining a penalty.
• Adjudicators should consider any potential unjust enrichment when determining a penalty. Furthermore, adjudicators should favor ordering restitution.
• If the financial professional raises questions regarding an ability to pay penalties, the adjudicator is required to consider the respondent’s bona fide ability to pay or comply with the sanctions.

Even a basic summary of universally applicable presumptions and principles reveals a significant amount of discretion in the proceedings that can be leverage by strategic counsel.

Changes to  FINRA’s Sanction Guidelines

Recent changes to FINRA’s sanction guidelines (published April 2017) are intended to bring the guidelines into accord with recent hearing and disciplinary proceedings. Changes to the guidelines include:

• Amendments to multiple sections of the Sanction Guidelines to permit for harsher penalties for serious violations.
• A new factor to guide determinations concerning whether sanctions mitigate or correct the violation.
• A new factor to guide all undue influence analyses.
• New sanction guidelines concerning Short Interest Reporting, Systemic Supervisory Failures, and Borrowing From or Lending to Customers

These changes to the guidelines are effective immediately and should be incorporated into any new or existing analysis concerning a FINRA disciplinary proceedings.

Work with an Experienced Attorney when Facing a FINRA Complaint

If you are concerned about a FINRA disciplinary proceeding, attorney William Heyman can provide careful and strategic guidance. Drawing on a Biglaw background, Mr. Heyman founded the Heyman Law Firm to provide high-quality guidance and responsive client service in a boutique firm setting. To schedule a confidential consultation at Mr. Heyman’s Baltimore law office, please call (410) 305-9287.