Arbitration losses could add to penalties for brokers violating Finra rules

Finra hearing officers will be looking for patterns of bad behavior in arbitration cases when imposing discipline on brokers.
MAY 02, 2018

Brokers facing Finra disciplinary action could have their penalties increased if they've also lost arbitration cases to customers related to their violations. In a regulatory notice released on Wednesday, the Financial Industry Regulatory Authority Inc. added arbitration outcomes to the sanction guidelines that Finra hearing officers use to determine punishments for registered representatives, such as fines, suspensions or industry bars. Finra told hearing officers to consider arbitration claims that result in settlements or awards for customers when they evaluate a disciplinary case. They are encouraged to determine whether a broker's disciplinary and arbitration history combined with the infraction "form a pattern." "When such a pattern is established, an adjudicator should consider imposing more severe sanctions than what would have been imposed if no pattern existed," the regulatory notice states. "These sanction guidelines bolster the ability of adjudicators to…protect investors and deter misconduct." Andrew Stoltmann, a Chicago securities attorney and president of the Public Investors Arbitration Bar Association, welcomed the move. "It's a good, common sense development," Mr. Stoltmann said. "Often, arbitration awards are the canary in the mineshaft when it comes to bird-dogging bad brokers. Anyone who has gone through a Finra arbitration and won, that's a pretty good indicator that the broker has some issues." The revision to the sanction guidelines goes into effect on June 1.

Latest News

No succession plan? No worries. Just practice in place
No succession plan? No worries. Just practice in place

While industry statistics pointing to a succession crisis can cause alarm, advisor-owners should be free to consider a middle path between staying solo and catching the surging wave of M&A.

Research highlights growing need for personalized retirement solutions as investors age
Research highlights growing need for personalized retirement solutions as investors age

New joint research by T. Rowe Price, MIT, and Stanford University finds more diverse asset allocations among older participants.

Advisor moves: RIA Farther hails Q2 recruiting record, Raymond James nabs $300M team from Edward Jones
Advisor moves: RIA Farther hails Q2 recruiting record, Raymond James nabs $300M team from Edward Jones

With its asset pipeline bursting past $13 billion, Farther is looking to build more momentum with three new managing directors.

Insured Retirement Institute urges Labor Department to retain annuity safe harbor
Insured Retirement Institute urges Labor Department to retain annuity safe harbor

A Department of Labor proposal to scrap a regulatory provision under ERISA could create uncertainty for fiduciaries, the trade association argues.

LPL Financial sticking to its guns with retaining 90% of Commonwealth's financial advisors
LPL Financial sticking to its guns with retaining 90% of Commonwealth's financial advisors

"We continue to feel confident about our ability to capture 90%," LPL CEO Rich Steinmeier told analysts during the firm's 2nd quarter earnings call.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.