Regulatory Outlook | 11.18.20
Persistently Naughty Firms Must Set Funds Aside, FINRA Says
FINRA is proposing rule changes that would impose new rules on firms with long histories of wrongdoing. One of the proposals would require companies with poor enforcement records to maintain a restricted account that could only be used with FINRA's approval. The rule would use numeric thresholds based on a company's and individual brokers’ disciplinary issues to identify firms that present a high risk to investors. A restricted deposit requirement would then be imposed on those businesses. FINRA has already filed the proposals with the Securities and Exchange Commission. The agency says the rules are the result of ongoing efforts to address the risks posed by companies and individual reps with a long history of misconduct. “FINRA believes that the direct financial impact of a restricted deposit is most likely to change such member firms’ behavior — and therefore protect investors,” the regulator said.
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