Broker- Dealer Law Corner

Broker- Dealer Law Corner

Tag Archives: disciplinary action

When FINRA Can’t Discipline The Firm, Individuals Pay The Price

Posted in CCO liability, Disciplinary Process, Enforcement, FINRA, Rule 3010
There has been a lot of discussion over the past few years, including in this blog, about the growing – and troubling – trend for Chief Compliance Officers to be named as respondents in disciplinary actions.  While regulators regularly deny that they truly have it out for CCOs, as is often the case, their actions… Continue Reading

It Can Pay To “Lawyer Up” When Dealing With FINRA

Posted in Defenses, Disciplinary Process, Enforcement, Examination, FINRA, OTR, Registered Representative, Sanctions
I realize that the title of this blog post may sound self-serving, so I apologize for that up front, as it is not my intent.  Still, there is a lesson here to be learned. I got a phone call yesterday from a reporter asking me to comment on a disciplinary action that FINRA had just… Continue Reading

Is There A Catch-22 To Fighting FINRA Charges?

Posted in Defenses, Disciplinary Process, Enforcement, FINRA, Registered Representative, Sanctions
Here is a fascinating analysis by my partner, Michael Gross, of FINRA’s twisted logic when it comes to sanctions:  your very decision not to admit liability and to put FINRA to its proof can, and will, be held against you when it comes time to determine the appropriate sanctions. Or will it?  –  Alan The FINRA… Continue Reading

2017 Off To A Bad Start For The SEC As The 10th Circuit Finds SEC ALJs To Be Unconstitutional

Posted in Administrative Proceedings, Disciplinary Process, Enforcement, SEC
Many industry authors – including me[1] – have devoted a lot of attention lately to the SEC’s increased use of Administrative Proceedings (rather than Federal court cases) in recent years, and questioned the fairness of such proceedings, given their relative lack of discovery tools, the short timeframe provided within which to prepare a case for… Continue Reading

Statutorily Disqualified? FINRA Says “Deal With It”

Posted in Disciplinary Process, Enforcement, FINRA, Sanctions, Statutory Disqualification
It is a nasty thing when one becomes statutorily disqualified. It means either leaving the industry, permanently, or having to file an MC-400 and trying to convince FINRA that you should be permitted to remain in the industry, albeit subject to heightened supervision and extra scrutiny from FINRA.  I have previously blogged about statutory disqualification,… Continue Reading

Looking For A Silver Lining: Post-Election Thoughts On The SEC

Posted in Administrative Proceedings, appeal, Disciplinary Process, Enforcement, SEC
Wednesday morning marked the confluence of two events. First, like the rest of the world, I awoke to the reality of the results of the presidential race.  Then, as soon as I got to the office, I received the results of a case (on which I have previously blogged) that the SEC’s Division of Enforcement… Continue Reading

When It Comes To Churning, FINRA Knows What’s Best For Investors

Posted in Churning, Disciplinary Process, Enforcement, FINRA
Since I first started practicing law back in the 1980s, customer complaints against brokers have often involved allegations of “churning,” which is deemed to be fraud. Now, as it was 30+ years ago, to prove a churning claim, a customer needs to demonstrate that (1) the broker acted with scienter, which is defined to be… Continue Reading

Frequently Asked Questions About FINRA Rule 8210

Posted in Disciplinary Process, Enforcement, Examination, FINRA, Rule 2010, Rule 8210, Sanctions
As readers of this Blog know, Rule 8210 is a favorite subject of mine to complain about, particularly the frightening vigor with which FINRA constantly tests the limits of the rule.  What follows are some very helpful FAQs about Rule 8210 from Michael Gross.  –  Alan The Scope of the Rule Can FINRA really ask… Continue Reading

A Settlement Agreement With FINRA (Or So You Thought)

Posted in Disciplinary Process, Enforcement, FINRA, Settlements
In OHO Order 16-26, a Hearing Officer confirmed what those uninitiated to FINRA’s disciplinary process likely would not even suspect: an agreement to settle a FINRA regulatory matter on terms proposed by FINRA’s Department of Enforcement is not necessarily an enforceable agreement. In this case, the respondent argued that FINRA should be estopped from seeking… Continue Reading

The Math of Mark-Ups/Downs

Posted in Disciplinary Process, Enforcement, FINRA, Mark-ups, Rule 2121
I am pleased to welcome a new author to Broker-Dealer Law Corner, my partner in Ulmer’s Boca Raton office, Michael Gross.  Like myself, Michael returned to private practice after a stint at FINRA, specifically, with the Department of Enforcement, where he handled big, litigated cases all over the US.  There is no substitute for the perspective one gains… Continue Reading

Advertising Case Loss Reveals Limits To FINRA’s Jurisdiction Over Outside Business Activities

Posted in Advertising, Disciplinary Process, Enforcement, FINRA, Rule 2210, Sanctions
It is a simple fact that a broker-dealer has no obligation to supervise a disclosed outside business activity. How do I know?  FINRA has said so.  This, for instance, comes straight from Reg Notice 05-50:  “Rule 3030 does not require that the firm supervise or even approve an outside business activity, although a firm may… Continue Reading

Procedural Motions In FINRA Enforcement Actions: An Exercise In Futility

Posted in Disciplinary Process, Enforcement, FINRA, Rule 9253
Defending a FINRA Enforcement action is not easy. This stems principally from the fact that FINRA simply won’t file a complaint in the first place if they believe that there’s any realistic chance they will not win the case.  Thus, they expect to win every time they do file a complaint, and perhaps not unreasonably… Continue Reading

The Wendell Belden Case And Its Progeny: Fiduciary Before Fiduciary Was Cool

Posted in Fiduciary duty, Fiduciary Standard, FINRA
The entire securities world is anxiously awaiting the implementation of the fiduciary standard over retirement accounts, and, by most accounts, the eventual spread of that standard to ordinary investment accounts. I am not prepared to argue that this is not a big deal, and will cost the industry a ton of time and money to… Continue Reading

In AML World, The Need To File A SAR Can, Apparently, Be Too Obvious To Ignore

Posted in AML, Compliance, Disciplinary Process, Enforcement, FINRA, SEC, Supervision
If you’re reading this, then you undoubtedly already know that FINRA and SEC are, simply, AML crazy. Rightly or wrongly, they are both focusing more than ever on broker-dealers’ fulfillment of their supervisory obligation to be sensitive to the laundry list of red flags first articulated in a Notice to Members back in 2002 that… Continue Reading

The Long Arm Of The Law Has Nothing On FINRA’s Reach

Posted in Disciplinary Process, Enforcement, Examination, FINRA, Registered Representative, Rule 2010
So, you’re a registered rep, working for a broker-dealer. Necessarily, you are registered with and subject to the oversight of FINRA, not a particularly happy proposition.  But at least you can take comfort in the fact that while FINRA may have the right to stick its nose into your securities business, what you do away… Continue Reading

Altering Documents In A FINRA Arbitration Can Have Consequences That Go Well Beyond The Arbitration Itself…At Least For Respondents

Posted in annuities, Arbitration, Disciplinary Process, Discovery, Enforcement, FINRA
The FINRA investigative process and the arbitration process exist side-by-side; at times, the misconduct that is alleged by a claimant in a Statement of Claim may simultaneously be the subject of an examination by Member Regulation, or even an Enforcement Complaint. Ordinarily, Enforcement doesn’t pay much attention to what happens in a parallel arbitration, except… Continue Reading

According To FINRA, “Culture Of Compliance” Is Not Only Definable, It’s Enforceable

Posted in Compliance, Culture, Disciplinary Process, Enforcement, FINRA, Supervision
Earlier this year, as part of its 2016 Examination Priorities, FINRA spent a lot time discussing the “culture of compliance” at broker-dealers, the notion that firms need to create an atmosphere where compliance with rules and regulations is more than just lip service, but, rather, where it is a priority established by firm management –… Continue Reading

Good Grief! MetLife Agrees To $20 Million Fine, And Another $5 Million In Restitution! For Negligence!

Posted in annuities, Disciplinary Process, Enforcement, FINRA, Suitability, Supervision
FINRA announced today that it entered into a settlement with MetLife Securities, Inc. in which MetLife agreed to pay FINRA a $20 million fine and its customers up to $5 million in compensation for, basically, making misrepresentations over a five-year period to customers who replaced one variable annuity with another regarding the costs of making… Continue Reading

FINRA’S Ability To Enforce Securities Act Violations Subject To Compelling Court Challenge

Posted in Disciplinary Process, Enforcement, FINRA, Rule 2010
Last week, word spread about a legal challenge that has been mounted in federal court against FINRA’s ability to enforce violations of the Securities Act of 1933, and, perhaps not surprisingly, it has generated a lot of talk, not to mention enthusiasm (at least among those who chafe at FINRA’s aggressive Enforcement mentality). The specifics of… Continue Reading

Lost at Sea: Why FINRA’s Lack of Formal Guidance to CCOs Could Leave Them Adrift in Dangerous Regulatory Waters

Posted in Compliance, Defenses, Disciplinary Process, FINRA
In Homer’s epic poem the Odyssey, Odysseus and the crew of his ship are faced with the impossible choice of either sailing closer to Charybdis, a whirlpool capable of sinking their entire ship, or, alternatively, to Scylla, a sea monster just as deadly.  Odysseus’ dilemma sprang to mind as I listened to a presentation last… Continue Reading

What In The Wells Is Going On With FINRA’s “Wells” Process?

Posted in Defenses, Disciplinary Process, Enforcement, FINRA, Settlements, Wells process
With any luck, you can go your entire career in the securities industry without ever participating in the dreaded “Wells process.” And that’s a good thing, as the Wells process occurs only after FINRA has completed an examination and has concluded that whatever it has encountered is so serious that a formal disciplinary action is… Continue Reading

(Another) Landslide Victory: FINRA Enforcement Offers ZERO Evidence Of Fraud

Posted in Disciplinary Process, Enforcement, FINRA, Private Placement, Sanctions
At the end of last week, we received our second[1] decisive win in a FINRA Enforcement case in a matter of days. Following a two-day hearing back in July, the hearing Panel dismissed all charges against our clients Paul J. McIntyre and MSC-BD, LLC. While any victory is nice, and doing justice for a client… Continue Reading
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