Regulatory Notice 11-07

FINRA Revises the Sanction Guidelines

Effective Date: February 9, 2011

Executive Summary

This Notice advises FINRA firms of modifications to the FINRA Sanction Guidelines. The changes reflect the experience of FINRA’s Departments of Market Regulation and Enforcement in settling and litigating cases, and incorporate the teachings of federal appellate court and SEC precedent in recent FINRA disciplinary cases. Specifically, the revisions:

  • remove the Minor Rule Violation Plan Letter from the definition of a disciplinary “action” for purposes of considering prior actions and the provision that discusses respondents charging fines and costs to credit cards.
  • modify the guidelines for violations related to the sale of unregistered securities to reflect that adjudicators should consider higher fines and firm suspensions in egregious cases.
  • incorporate into the FINRA Rule 8210 guidelines relevant federal court and SEC precedent. The FINRA Rule 8210 Guidelines also now delineate principal considerations for the three categories of violations. And for a partial but incomplete response to a FINRA Rule 8210 request, the guidelines now reflect parity with the fine for a failure to respond or respond truthfully.
  • expressly provide for restitution or disgorgement in certain trading halt and best execution cases, and amend the suitability guidelines for use in cases where respondents have violated the “Recommendation Rule.”
  • add new guidelines for failing to comply with rule requirements related to customer confirmations and extended hours trading risk disclosure.
  • reflect the new FINRA rule numbers for rules that have been adopted into the consolidated FINRA rulebook.

 

The revised Sanction Guidelines are effective immediately and available on FINRA’s website.

 

Questions concerning this Notice may be directed to:

  • Emily Gordy, Department of Enforcement, at (202) 974-2916;
  • Louise Corso, Department of Market Regulation, at (240) 386-5241; and
  • Jennifer Brooks, Office of General Counsel, at (202) 728-8083.