California Financial Industry Regulatory Authority (FINRA) Attorneys
Century Law Group specializes in defending licenses and in representing those seeking licenses before the Financial Industry Regulatory Authority.
FINRA takes disciplinary actions against firms and individuals for violations of FINRA rules; federal securities laws, rules, and regulations; and the rules of the Municipal Securities Rulemaking Board.
If you have been notified by FINRA that you are the subject of a FINRA examination or FINRA investigation, you need competent and experienced legal counsel to guide you through this challenging process. Your license, career and potentially thousands of dollars in fines are at stake. Do not go to the initial exploratory conference unprepared where you will be required to give on the record testimony that may be used against you by FINRA’S Office of Hearing Officers. If you have been accused of violations of FINRA rules contact an experienced attorney at our Firm to discuss your best options and legal strategy today, 866-522-2642.
Adjudication
FINRA employs a fair system for disciplining firms and individuals who break the rules. FINRA may take disciplinary action through a settlement, or issue a formal complaint. If a complaint is issued, the case is heard before a panel which is chaired by a professional hearing officer and includes two industry representatives.
At the hearing, the parties present evidence for the Hearing Panel to evaluate in determining whether a firm or individual has engaged in conduct that violates FINRA rules, the federal securities laws, or SEC regulations. The Hearing Panel also considers previous court, SEC, and FINRA’s National Adjudicatory Council (NAC) decisions to determine whether violations occurred. The Hearing Panel uses the FINRA Sanction Guidelines to determine appropriate sanctions, and issues a written decision explaining the reasons for its ruling.
A firm or individual has the right to appeal to a Hearing Panel decision to the NAC, a body that is equally balanced between individuals who are in the securities business and non-industry representatives. Unless FINRA’s Board of Governors decides to review the NAC’s decision, that decision is FINRA’s final action in the matter. A firm or individual can appeal FINRA’s action to the SEC and then to a federal court.
General Principles Applicable to All Sanction Determinations
- Disciplinary sanctions are remedial in nature and should be designed to deter future misconduct and to improve overall business standards in the securities industry.
- Disciplinary sanctions should be more severe for recidivists.
- Adjudicators should tailor sanctions to respond to the misconduct at issue.
- Aggregation or “batching” of violations may be appropriate for purposes of determining sanctions in disciplinary proceedings.
- Where appropriate to remediate misconduct, Adjudicators should order restitution and/or rescission.
- Where appropriate to remediate misconduct, Adjudicators should consider a respondent’s ill-gotten gain when determining the amount of a fine.
- Where appropriate, Adjudicators should require a respondent to requalify in any or all capacities.
- When raised by a respondent, Adjudicators are required to consider ability to pay in connection with the imposition, reduction or waiver of a fine or restitution.
Adjudication Possible Punishments (FINRA Sanction Guidelines)
Calculation of days of suspension . As was the case in prior versions of the FINRA Sanction Guidelines, recommendations for the imposition of suspensions contained herein distinguish between suspensions for 30 or fewer days and 31 or more days. In these guidelines, the NAC recommends that a suspension of 30 or fewer days be measured in business days, while a suspension of 31 or more days be measured in calendar days.
Censorships . These guidelines do not specifically recommend whether or not Adjudicators should impose censures under any of the individual sanction guidelines for particular violations. In the following two instances, however, Adjudicators generally should not impose censures: 1) in cases in which the total monetary sanction (fines, disgorgement, and restitution) is $5,000 or less and the disciplinary action (regardless of the number of violations alleged) involves the violations indicated in Schedule A to these guidelines; and 2) in cases in which an Adjudicator imposes a bar, expulsion or suspension. Adjudicators should impose censures in cases in which fines above $5,000 are reduced or eliminated due to a respondent’s inability to pay or bankruptcy. Adjudicators may also impose censures in cases in which this policy would suggest no censure if the Adjudicator determines that extraordinary circumstances exist.
Monetary Sanctions – Imposition and Collection of Monetary Sanctions. FINRA has identified the circumstances under which Adjudicators generally will impose and the FINRA generally will collect monetary sanctions. In that the overriding purpose of all disciplinary sanctions is to remedy misconduct, deter future misconduct, and protect the investing public, Adjudicators may exercise their discretion in applying FINRA’s policy on the imposition and collection of monetary sanctions as necessary to achieve FINRA’s regulatory purposes. The following lists of violations may not be exhaustive and these recommendations may also be appropriate for other types of cases.
- Adjudicators generally should not impose a fine if an individual is barred and there is no customer loss in cases involving the following types of misconduct: • failure to respond under Rule 8210; • exam cheating; and • private securities transactions (if the Adjudicator does not order disgorgement or restitution).
- Adjudicators generally should not impose a fine if an individual is barred and the Adjudicator has ordered restitution or disgorgement of ill-gotten gains as appropriate to remediate the misconduct in cases involving the following types of misconduct: • conversion or improper use of funds or securities; • forgery; and • sales practice and private securities transaction cases (if only one or a small number of customers are harmed).
- Adjudicators generally should impose a fine and require payment of restitution and disgorgement even if an individual is barred in all sales practice cases if: • the case involves widespread, significant and identifiable customer harm; or • the respondent has retained substantial ill-gotten gains.
- In all cases, Adjudicators may exercise their discretion and, if a bar is imposed, refrain from imposing a fine, but require proof of payment of an order of restitution when a respondent files an application for re-entry into the securities industry. Adjudicators also may, in their discretion, impose a suspension and a fine, but require proof of payment of the fine when the respondent re-enters the securities industry. In this regard, Adjudicators should consider the following factors: • whether the respondent is suspended or otherwise not in the securities industry when the sanction is imposed; and • the number of customers harmed. Respondents may charge fees and costs to credit cards.
Additionally, respondents may be permitted to pay purposes and costs through an installment payment plan. Installation payment plans generally will be limited to two years (although in extraordinary cases, installment payment plans may be extended to not more than five years). Respondents who are allowed to use an installment payment plan will be required to execute promissory notes that track the installment payment plan. Organization. These guidelines are organized into 11 subject-matter categories and arranged alphabetically by name in each category. In addition, the index lists all the guidelines alphabetically by name.
Restitution – Payment of interest . When ordering restitution, Adjudicators may consider requiring the payment of interest on the base amount. Generally, interest runs from the date(s) of the violative conduct and should be calculated at the rate established for the underpayment of federal income tax in Section 6621 of the Internal Revenue Code, 26 USC Section 6621(a)(2). If appropriate, Adjudicators may order payment to a state escheat fund of any amount that a respondent is not able to pay in restitution because he or she is unable, after reasonable and documented efforts, to locate a customer or other party to whom payment is owed .
Suspensions, bars and expulsions . These guidelines recommend suspensions that do not exceed two years. This upper limit is recommended because of the NAC’s sense that, absent extraordinary circumstances, any misconduct so serious as to merit a suspension of more than two years should probably warrant a bar (of an individual) or expulsion (of a member firm) from the securities industry. Notwithstanding the NAC’s recommendation in these guidelines to impose suspensions that do not exceed two years, under FINRA’s rules, an Adjudicator may suspend the membership of a member or the registration of a person associated with a member for a definite period that may exceed two years or for an indefinite period with a termination contingent on the performance of a particular act. It should be noted that an individual who is barred from associating with a member firm in any capacity generally may not re-enter the industry. Although a barred individual may seek special permission to re-enter the industry via FINRA’s eligibility process, to date, the NAC has disfavored applications for re-entry.
Visit the following links for further information on: Sanction Guidelines and Disciplinary Actions (Source: www.Finra.org)
