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Changes to FINRA Enforcement Structure

Background

Until mid-2017, FINRA maintained two distinct enforcement teams within the organization—one handling disciplinary actions related to trading-based matters found through our market surveillance and trading examination programs, and the other handling cases referred from other regulatory oversight divisions within FINRA, such as sales practice examinations and our Office of Fraud Detection and Market Intelligence. Through FINRA360, we analyzed stated firm concerns that these dual programs sometimes resulted in duplication of effort and inconsistency of results.

In 2018, we combined FINRA's two enforcement teams into one, under the leadership of a new Executive Vice President of Enforcement reporting directly to the CEO, with a seat on FINRA's Management Committee. As part of the merger, FINRA initiated a department-wide restructuring that better aligns roles and responsibilities across the unified department, including new managerial and staff roles and new goals for all department staff that align with Enforcement’s priorities.

“We built our integrated department with a focus on resolving cases with consistent, foreseeable outcomes designed to effect change—to incentivize compliance, to fix things that are broken, to make harmed customers whole and to prevent future harm from recurring.”

— Susan Schroeder, Executive Vice President, Enforcement, Speech at SIFMA Anti-Money Laundering & Financial Crimes Conference, February 12, 2018

These changes to FINRA's enforcement program are designed to reinforce this quintessential self-regulatory function. The unified structure improves FINRA's ability to streamline investigations, share information, enhance consistency and predictability and maximize our resources to protect investors and the markets. These changes will result in a more effective and efficient enforcement function that will enable the organization to vigorously and fairly enforce applicable rules.

In addition to taking important steps to complete the merger of the programs, the Executive Vice President of Enforcement has provided clear communication to the industry and general public of FINRA's approach to pursuing and resolving enforcement cases. 1

Summary of Actions

  • Announced a new senior leadership team within Enforcement, consisting of experienced Enforcement professionals with a range of industry experience including management roles at the SEC, securities litigation experience with the Department of Justice and with law firms representing broker-dealers, and management in member firm compliance.
  • Created a new senior management role responsible for reviewing the Enforcement docket holistically and identifying and escalating matters for discussion to ensure a cohesive organization-wide approach to novel or interpretive enforcement issues.
  • Created a new division within Enforcement to support the new role responsible for centrally reviewing Enforcement’s recommendations. This staff of experienced senior attorneys reviews certain Enforcement outcomes to ensure consistent escalation and resolution of enforcement issues.
  • Established the Regulatory Actions Committee, a group consisting of the senior leaders of Market Regulation, Member Supervision, Enforcement and General Counsel. This group meets to discuss potentially noteworthy Enforcement outcomes and novel regulatory issues that might affect multiple departments.
  • Clearly communicated to the industry and the public FINRA's approach to pursuing and resolving enforcement cases.
  • Developed a new business process to centralize and enhance reviews of Enforcement's recommendations to achieve greater consistency and transparency in outcomes.
  • Consolidated the Enforcement litigation docket to achieve a unified approach, strategic staffing and shared best practices in all FINRA disciplinary litigations.

 


1. www.finra.org/newsroom/speeches/021218-remarks-sifma-am