Finra set to propose new rules targeting rogue brokerages

Board says the measures will be published for comment 'soon'

Mar 13, 2019 @ 2:04 pm

By Mark Schoeff Jr.

Finra is poised to propose new rules targeting rogue brokerages.

The Financial Industry Regulatory Authority Inc. made the announcement Wednesday in a statement about its Feb. 28 – March 1 board meeting in Boca Raton, Fla.

"The board approved moving forward with proposing new rules related to firms that have a disproportionately high number of regulatory disclosure events by the firm and/or its registered representatives," Finra said in the statement. "Finra will soon publish a regulatory notice seeking comment on the rules."

A Finra spokesman declined to comment further on what will be in the proposal or when it will come out. Proposed rules are sometimes released several weeks or months after the board has OK'd their dissemination.

In a video accompanying the board report, Susan Wolburgh Jenah, a member of the board's regulatory policy committee, said the initiative is something "we've been talking about a great deal over the last few quarters."

Finra has been under pressure for years to crack down on firms that hire a high number of brokers who have violated the self-regulator's rules and caused investor harm.

Finra CEO Robert W. Cook gave a speech in June 2017 in which he told firms that Finra would provide more direction on how to oversee brokers with a history of misconduct. That speech was followed in April 2018 by guidance on heightened supervision.

Mr. Cook "has made it very clear it's a concern of his," said Emily Gordy, a partner at McGuireWoods and a former Finra senior vice president of enforcement. "Clearly, they think they need to go further."

Todd Cipperman, principal at Cipperman Compliance Services, hopes the new rules will provide more specifics about what constitutes a rogue broker and how many have to be hired to taint a firm.

"It would be good if the rule included some explanation of how much bad history is too much," Mr. Cipperman said. "Right now, there are broad bromides about being more vigilant but there are no definitions of what is a bad broker and what you're supposed to do about it."


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