The Financial Industry Regulatory Authority (FINRA) has announced that the National Adjudicatory Council (NAC) introduced new sanction guidelines, requiring the NAC and FINRA staff to consider the exercise of undue influence over a customer when determining appropriate sanction levels. The NAC is FINRA’s “appellate tribunal” for disciplinary cases. The Sanction Guidelines—first published in 1993—provide member firms with typical securities law violations and the range of disciplinary sanctions that may result.
Unlike the recent senior investor-related rules (FINRA Rule 2165, Financial Exploitation of Specified Adults; FINRA Rule 4512, Customer Account Information), which do not become effective until February 5, 2018, the new sanction guidelines apply to FINRA cases immediately.
In the recent years, FINRA has increasingly turned its attention to issues affecting senior investors. For example, in April 2015, FINRA issued a joint report with the U.S. Securities and Exchange Commission (SEC) designed to help broker-dealers assess and refine their policies and procedures related to senior investors. Also in April 2015, FINRA launched its Securities Helpline for Seniors. And in March 2017, the SEC approved a new rule (Rule 2165) and approved revisions to an old rule (Rule 4512) that address the financial exploitation of senior or vulnerable investors. Given FINRA’s increased focus on senior and vulnerable investors, member firms can expect additional scrutiny from FINRA when it comes to their handling of these investors.