FINRA Publishes Sanction Guidelines
FINRA has published its “Sanction Guidelines” offering guidance so that members know the types of disciplinary sanctions that may be applicable, thereby encouraging respondents to settle cases because “settled cases generally result in lower sanctions than fully litigated cases.” FINRA offers some general principles applicable to all sanctions: they should be significant enough to deter future misconduct by the respondent and others, recidivists should receive harsher treatment, adjudicators have wide latitude in the type of sanctions (fines, independent consultants, disclosure, bars, etc.), restitution should be considered along with disgorgement, re-taking of qualification exams may be necessary, and ability to pay is a factor. FINRA also offers some factors to consider including whether the firm had adequate supervisory procedures including training and education and whether the firm relied on outside legal or accounting advice.
OUR TAKE: We applaud FINRA for laying out a framework for sanctions so that the enforcement process does not take on elements of a clandestine star chamber where penalties appear completely discretionary and subjective. It also helps counsel advise clients on how and when to settle.