Finra CEO Robert Cook promises to give brokerages more guidance on overseeing rogue brokers

Initiative is part of an effort to crack down on brokers who move from firm to firm and put investors at risk

Jun 12, 2017 @ 2:04 pm

By Mark Schoeff Jr.

+ Zoom

Finra intends to help brokerages better identify and supervise brokers with checkered disciplinary histories who may pose risks to investors.

In coming months, the broker-dealer self-regulator will delineate Finra's expections, CEO Robert Cook said during a speech at Georgetown University Monday.

The Financial Industry Regulatory Authority Inc. put high-risk brokers at the top of its examination priorities list for this year, indicating that it is taking a look at whether brokerages hiring them are implementing heightened supervision to prevent future misconduct. In the ongoing listening tour that has marked the first year of his tenure, Mr. Cook said that Finra members have asked for more direction.

"Based on our conversations with firms, there's potential value in our providing some heightened guidance about what we think they should be looking at," Mr. Cook said. "Our intention is to provide a better understanding of what our expectations are about [as to] how they should go about identifying brokers who may merit heightened supervision and about what the elements of heightened supervision might be."

Finra has been under pressure for years to crack down on recidivist brokers who bounce from firm to firm. Finra has put in place a high-risk broker program that has resulted in barring 120 brokers from the industry since 2014, Mr. Cook said. Another 420 are no longer registered with a Finra-member firm.

At its May meeting, Finra's board advanced proposals that would allow tougher penalties for brokers with certain past infractions, enable disciplinary hearing panels to restrict the activities of brokers and firms while a case is on appeal, and require firms to strengthen supervision while a "disqualification request" is under review or a broker is appealing a hearing decision.

The board has established a special working group on high-risk brokers led by former Securities and Exchange Commission chairwoman Elisse Walter.

More rulemaking could be on the way.

"We are also considering additional measures," Mr. Cook said in his Georgetown speech. "One approach would be to amend our rules to establish additional requirements when a firm or individual meets specified risk criteria in order to further deter misconduct and incentivize greater focus on the relevant risks."

Any such proposal would be put out for comment, Mr. Cook said. Finra rules must be approved by the SEC.

Finra oversees approximately 3,800 brokerages and 634,800 registered representatives.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

How advisers can better communicate the risks and rewards of investing in emerging markets

Senior columnist John Waggoner discusses how financial advisers can help clients better understand the advantages of having exposure to emerging markets and the increased volatility that often comes along with investing in them.

Latest news & opinion

Advisers get more breathing room to make Form ADV changes

RIAs can enter '0' in some new parts of the document before their annual filing next year.

Since banking scandal, Wells Fargo advisers with more than $19.2 billion leave firm

Despite a trying year, the firm has said it will sweeten signing bonuses for veteran advisers.

Is LPL's deal sweet enough for NPH's 3,200 reps and advisers?

They will have to decide if the signing package they are being offered by LPL makes sense. A lot is hanging in the balance.

Eduardo Repetto to leave Dimensional Fund Advisors

Gerald O'Reilly, currently co-CIO, will take over as co-CEO with David Butler.

Alternative strategies boomed after crisis, but haven't been tested

Because the S&P 500 has outperformed, convincing clients they need protection is a hard sell.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print