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FINRA Enforcement: Protecting Investors and Markets in Good Times and Bad

May 12, 2020

FINRA Enforcement works on the front lines of investor protection—not just now, as some look to take advantage of these uncertain time to defraud investors or manipulate the markets – but always.

On this episode, we meet Jessica Hopper, FINRA’s new Executive Vice President and Head of Enforcement, to hear what her team is doing today, and every day, to prevent investor harm and to maintain the integrity of our markets. Plus, we hear what keeps Jessica motivated to do what she does.

Resources mentioned in this episode:

Episode 9: Introducing FINRA’s New Enforcement Team

Monthly Disciplinary Actions

Individuals Barred by FINRA

Listen and subscribe to our podcast on Apple PodcastsGoogle PlaySpotify or where ever you listen to your podcasts. Below is a transcript of the episode. Transcripts are generated using a combination of speech recognition software and human editors and may contain errors. Please check the corresponding audio before quoting in print. 


00:00 - 00:26

Kaitlyn Kiernan: FINRA Enforcement works on the front lines of investor protection--not just now as some may look to take advantage of these uncertain times to defraud investors or manipulate the markets--but always on this episode we meet Jessica Hopper, FINRA's new head of enforcement, to hear what the team is doing today, and every day, to prevent investor harm and maintain the integrity of our markets and to hear why Jessica does what she does.

00:26 – 00:35

Intro Music

00:35 - 00:51

Kaitlyn Kiernan: Welcome to FINRA Unscripted, from Hoboken New Jersey, I'm your host Kaitlyn Kiernan. We've got a brand-new guest for our latest remote episode of FINRA Unscripted today. Joining us is Jessica Hopper, FINRA Executive Vice President of Enforcement. Jessica, thanks for joining us.

00:51 - 00:53

Jessica Hopper: Good morning. Thanks for having me.

00:53 - 00:59

Kaitlyn Kiernan: So, Jessica, where are you normally based when we're not all working from home?

00:59 - 01:10

Jessica Hopper: I am normally based in the New York office and then I also travel a great deal. I try to spend time in all of our 14 district offices most frequently though in D.C..

01:10 - 01:25

Kaitlyn Kiernan: So, in January of this year you were appointed Executive Vice President and Head of Enforcement, but you aren't new to FINRA any of our listeners who have been to any FINRA conferences or other industry conferences might be familiar with you. Can you tell us a little bit about your background?

01:26 - 02:10

Jessica Hopper: Sure. I've been at FINRA since 2004, and I actually started as a line attorney. Through time I rose the ranks and ultimately headed the Regional Enforcement program. And that responsibility was over the 14 district offices. I did that for a few years and then I worked closely with Susan Schroeder as the Deputy Head of Enforcement and now I'm lucky and privileged enough to be the Head of Enforcement. During that time, I really have had an opportunity to work with many in the securities defense bar. So, I have had a lot of exposure over the long time that I've been at FINRA. I've also spent a lot of time speaking on behalf of FINRA. So, I think a lot of folks have seen me out there.

02:11 - 02:20

Kaitlyn Kiernan: Well it's great to hear when someone joins an organization and advances all the way through the ranks like that. So, what did you do before joining FINRA?

02:20 - 02:46

Jessica Hopper: I started out of law school, like many, working at a big firm in Chicago where I'm from. I moved to D.C. after some time and after doing some legal work in securities law I decided to shift gears completely and got a job as a compliance officer actually at a super-regional BD in Baltimore. And I really loved it. From there I came to the regulatory side and I've been here ever since.

02:46 - 02:53

Kaitlyn Kiernan: So how do you think working in the compliance side of things has shaped your perspective in your new role?

02:53 - 03:36

Jessica Hopper: It's really been the most valuable experience for my work here at FINRA. When you're on the firm side you see that the people in the industry are real people who care about their clients and who are trying really hard to get it right. You have a real view of what supervision looks like and what can go wrong, and you have a better sense of the technology challenges that firms face. You also see the tensions between compliance and sales. And all of those pieces are incredibly valuable and important and understanding our day to day work. Generally, I look at every case through that spectrum, and I try to offer that perspective to the folks who I work with every day.

03:36 - 03:41

Kaitlyn Kiernan: So those are some unique challenges that it's hard to get a sense of without having experienced them yourself.

03:41 - 03:42

Jessica Hopper: It really is.

03:42 - 04:00

Kaitlyn Kiernan: So, you inherited a team in January that had recently undergone a consolidation, which we discussed with your predecessor and Episode 9 of this podcast. Was it a challenge to take over so quickly after such a big change to the enforcement team?

04:01 - 05:15

Jessica Hopper: It's not, because it's not really a new team to me and it doesn't really feel like an inheritance. Like I said I've been here for a long time and I've worked with the team on every level for 14 years so when we did the transition, I worked closely with Susan Schroeder, and the idea of consolidation and all the changes we made were ones that both Susan and I closely considered carefully before we implemented. All of the changes we made or the result of the FINRA 360 review, and we found that to be really helpful to understand not just what we were doing right but what we could improve on. And that's super valuable information.

So, we consolidated the Market Regulation Enforcement team with the rest of the Enforcement group, so that enforcement would finally speak with one voice. That consolidation has allowed us to focus more clearly on our priorities and to be even more consistent with our outcomes. We're also very fortunate to have all the Market Regulation attorneys working with the rest of the Enforcement staff. And that has expanded our expertise, which has been extremely valuable in how we look at every case that comes across the docket.

05:17 - 05:33

Kaitlyn Kiernan: And you've taken the reins of the enforcement group at a challenging time here not just in the financial industry but across the country and across the globe. How does the ongoing COVID-19 pandemic change, if anything, how your team works?

05:34 - 06:50

Jessica Hopper: It's been a challenge for everyone, for sure. I think this has been a complicated time. The pandemic has affected everybody in such personal ways and on top of that we've been asked to scatter to the winds and work from our home. So now we are on an all remote environment. What hasn't changed though and what remains our North Star during all of this is our commitment to protecting investors and market integrity, and that's been very grounding for everyone. So now more than ever it's incumbent upon Enforcement to act quickly and aggressively to stop the folks who are taking advantage of this time to defraud investors or to manipulate the volatile market. And that's exactly what we want to do every day.

So, we're ready. And thanks to the great technology that we have, we've been able to not skip a beat along the way. We've been focused on our dockets. We've done everything we can to keep our cases moving and to keep the confidence of the investing public and make sure that the markets are doing what they're supposed to be doing. So, it's been a big challenge, but I am not surprised and eternally impressed with my staff for keeping their eye on the ball.

06:51 - 06:56

Kaitlyn Kiernan: So long term, what is your vision for FINRA Enforcement?

06:56 - 08:52

Jessica Hopper: My vision for FINRA Enforcement is what I believe FINRA Enforcement always has been. I look at FINRA Enforcement as being tough, but fair. And what that means is that when Enforcement is the right regulatory response, that we are thoughtful, we are thorough in our investigation, but we're also quick and nimble and data driven and effective. So, if we find that a broker is stealing from customers we have to move urgently. We have to make sure that once we investigate the broker quickly and identify that the broker is in fact stealing from the customer that we want them out. And we can do that in as little as a few weeks after learning about the misconduct. And so being tough, we really are focused on our four priorities and these priorities are evergreen. They will be priorities eternally.

So, our first priority is obtaining restitution for harmed customers. When a customer has been financially harmed through whatever misconduct we identify, we want to get the money back to them quickly. We're also focused on the brokers who are doing the misconduct that includes fraud or other really bad stuff--misconduct that's going to affect customers. And we are double down on those brokers who have a past history of misconduct and who continue to not get it right. And we will always be focused on seniors and vulnerable investors. Those are the customers who the worst brokers are going to prey upon. Those are the customers who are most likely to be harmed. And finally, we're committed to ensuring the integrity of markets, because if we don't have markets that are reliable then we're not going to have the trust of investors and the industry just can't succeed.

08:53 - 09:00

Kaitlyn Kiernan: All right. So, I think that covers the tough side of things. How does a fair side of things balance in?

09:01 - 09:49

Jessica Hopper: The fair side of things is being transparent about our processes, and we try very hard to make sure people understand that we don't have 300 and some attorneys who are running around independently making decisions. We have lots of gates to cross along the investigation and through formal action to make sure that we are doing things not just correctly under the law but fair and consistent. We try very hard to have predictable outcomes. So, when you look at a case that was done out of one office you won't see any difference how it will be done across the country. We try to be consistent and predictable, and importantly when we consider what the regulatory response is for the misconduct, we really tailor it to what the misconduct is.

09:49 - 09:54

Kaitlyn Kiernan: How do you work to be transparent when your processes and the outcomes?

09:55 - 11:35

Jessica Hopper: Consistency and transparency are important because we are trying to send a message to the industry about what conduct is the wrong conduct, what conduct is acceptable in an industry that we want to keep fair and focused on investors. And when we heard from the industry through this 360 process, which again was very helpful, what we heard from the industry is that we need to be more transparent in what we do more consistent in our outcomes. And so, we took that very seriously and tried to create an Enforcement department that did even better to make consistent outcomes, to have transparent settlements that described better what exactly happened in each matter and how those sanctions line up.

To us, that is the most important part of the 360 response from Enforcement. And so, in doing that, one of the things we did was created the Office of the Counsel to the Head of Enforcement. And that group is responsible for taking a look at all of our cases and figuring out where we do things consistently and where we don't and how we can fix that. They're also required to look at certain types of cases to make sure that we are actually speaking clearly on what we do. We also push out a lot of information to our managers to make sure that they understand where the risks are for us to be clear and how we describe what we're seeing and why the sanctions make sense.

11:35 - 11:39

Kaitlyn Kiernan: What resources do you have to help firms, or even the public, as a result of your work?

11:40 - 13:06

Jessica Hopper: I think of my time as a compliance person and remember going through the FINRA formal actions and trying to glean from that what matters, and what can help me in my day to day job. And I try to think of that when I think about Enforcement's job to be consistent in our formal actions. Are we telling the story well enough? Are we including enough facts to be informative? And does where outcome makes sense when considered with the facts? And so that's what we strive to do every day. That's what I think the we will continue to look at how we can do that better every single time.

One of the most helpful things as a compliance officer that I found was looking at the Disciplinary Actions. And so, we come out with Disciplinary Actions notices monthly. Those will tell you all the matters that we've brought. And from an industry side, it really is interesting to see how those apply to what you're seeing every day on the inside. You can also go to our Disciplinary Actions database on And that is a wellspring of information for you to understand what the misconduct looks like and what traps to avoid. There's all the information you need about brokers who've been barred from FINRA. So, if you're an investor that's particularly important to understand.

13:06 - 13:08

Kaitlyn Kiernan: We'll link to those resources in our show notes.

13:10 - 13:10

Jessica Hopper: Excellent.

13:11 - 13:26

Kaitlyn Kiernan: So, I want to talk a little bit more about the priorities as you mentioned. One of them was focusing on egregious misconduct and brokers or the past history of misconduct. Why the focus and why not strive to root out all rule violations?

13:26 - 14:56

Jessica Hopper: Our priorities are just that. They are the bread and butter of what we do. They're the focus of what we do every day. To say that we ignore other charges would be incorrect. We look for misconduct that rises to the level of an Enforcement action but because we have only so many resources, we really have to be thoughtful and risk based in how we apply those resources. So, our focus continues to be on our priorities, on the highest risk misconduct, on the misconduct that really could harm the most vulnerable members of the public and really presents the highest risk on our markets.

For instance in matters where we have elderly customers who've been the subject of predatory brokers who look to churn their accounts--that means to buy and sell stocks at a high rate--when the customers really had no understanding of what was happening, then that's the type of misconduct we're going to really attack aggressively. Similarly, for customers who are on a fixed income, they're looking for the highest rate of return. And we've run into brokers who really are looking for those types of customers to take advantage of and offer products that may have a potential for a high return but are extraordinarily risky and they're not appropriate for somebody living on fixed income. Those are some of the brokers we will look to bring formal actions against.

14:57 - 15:11

Kaitlyn Kiernan: I think sometimes there is a perception that Enforcement is all about numbers. You know, you have to hit X number of fines or X number of total cases. What's your response to that kind of perception that's out there?

15:11 - 16:54

Jessica Hopper: Yeah, I've definitely heard that perception and I can understand why people look at numbers as a measure, because numbers in many ways are a measure of what we do. But they are not the best measure at all. We measure priorities, by the priorities I talked about. So how much restitution are we getting back to customers> How many brokers who are engaged in the worst misconduct are we getting out? How many seniors and vulnerable investors have we protected? How are we doing on that score? And what doesn't reflect those things are fines.

And I hear a lot of criticism where every year we hear measuring of our program's success or lack of success by fines. But when you look at restitution, a lot of those matters, the fines aren't going to be there or they're not going to be as high. We're really focused on the restitution. Or when you get bad brokers out. When we bar a broker, we're not collecting a fine. The goal there is to get the broker out and that is more valuable than any fine that we can collect. In firm cases--and there are very few of these, but there are some firms who are not in the industry to do right by their customer--when we get those firms out those are very hard fought battles, they are very resource intensive to get the right outcome. But there is no finding fault with that. So, if you think about that, those are a very resource-intensive cases. Those are the cases that are aligned with our priorities and they're not going to recruit fines. And we are still extraordinarily happy with those outcomes.

16:54 - 17:01

Kaitlyn Kiernan: So, I want to switch over and talk a little bit about the Enforcement process. What happens once your team receives a referral?

17:03 - 18:46

Jessica Hopper: So, there's a lot of work even before we receive a referral. The work starts when the analyst in Market Regulation or the examiner in Member Supervision lets us know that they've seen something that might be violation of a rule or some other sort of misconduct that they believe could warrant an Enforcement action. So, there's close partnership with those groups to make sure that we have staffed every one of those matters to make sure that it really is something that rises to the level of an Enforcement referral. I want to be clear: not everything is an Enforcement action.

Not every rule violation is an Enforcement action. We are one of a myriad of regulatory responses ranging from a simple conversation with a firm to cautionary action letter and up to an Enforcement action. So, we try to work thoughtfully to understand what the problem is and whether it even rises to the level of an Enforcement action. Once the referral comes over, we take a look at all the evidence that we have. We look at any evidence that would mitigate or lessen the violation. We look at every fact thoughtfully and then the attorney makes a recommendation of whether something should go forward. That can become a settlement or a complaint. And once that's done that has to go through at least two managers.

This isn't an easy process. And managers review and question. And once we all agree that this is something that should become an enforcement action, then we approach the broker or the firm and begin discussions on what we see, why we believe it's an enforcement action and then we work through a settlement if that's the case.

18:47 - 18:54

Kaitlyn Kiernan: So, what's the difference between a settlement versus a complaint or a litigation process?

18:54 - 20:42

Jessica Hopper: Once we start talking to the firm or the individual, we tell them what the potential charge is and what we believe the appropriate sanction is. Like I said we try to tailor every sanction, so it could involve restitution if there was some customer harm. It could involve timeout and it could involve a fine. Or it could involve an undertaking, like re-qualification. When we have those negotiations, we usually come to an agreement with either the firm or the individual that we will do a settlement.

And so, the settlement document, this document, it's called the AWC. It provides all the details or all the facts and the sanction. And that's the document that gets issued to the public. You should note that that settlement document doesn't just exist because the respondent and FINRA agree to it. It has to go through an approval process through an independent part of FINRA called the Office of Disciplinary Affairs, or ODA. So, ODA does a review to make sure that our settlements are fair and consistent. And after they review and hopefully approve, then that's when the document gets issued.

A complaint is a little different. Complaint is when those settlement negotiations break down and we just can't agree on the sanctions or the charges. And at that point we're at the fork in the road where we say "okay, we can't do this settlement. It's time to do a complaint." So, we file a complaint to litigate in front of the Office of Hearing Officers. That's also an independent part of FINRA. And when we file a complaint that again is reviewed and approved by ODA, then we bring the case in front of the Hearing Officer and two of the industry panelists. And they review all of our evidence. It's just like a hearing that you'd see in any other litigation. And they come to a decision.

20:43 - 20:49

Kaitlyn Kiernan: Before we wrap up, is there anything else you'd like to share as a recently appointed Head of Enforcement?

20:50 - 21:58

Jessica Hopper: I would share that the enforcement team is an outstanding team, and I'm obviously very biased along those lines, but I do believe that we are fortunate to have such very talented lawyers. We continue to recruit the best lawyers out there, who are able to come in and who are devoted to the mission every single day. And I want everyone to understand that no one comes to this role or comes to a case thinking that they're just to just bring cases. Their job is to be thoughtful in analyzing the evidence and working with the investigators, the examiners, the analysts here at FINRA, who really have an outstanding expertise, and to review every matter as its own piece--to understand that what our role is really is to protect investors and the industry, to make sure that the investing public really believes that we are a great industry that's protected by a strong self-regulatory organization that cares deeply about the future of the industry.

21:58 - 22:03

Kaitlyn Kiernan: Why do you do what you do? What keeps you going?

22:03 - 24:29

Jessica Hopper: I've been doing this for a long time, so I've decided that I really like it. When you think about your own experience of trying to save for the future, all of that's very personal. And when things go wrong it's very scary. I try to think of that every day when I come to work, and I think about what we do and who this impacts. When you're a broker and you're trying to do good work and you see that there are brokers out there who are just trying to steal from other customers, it's not fair to the good brokers. It's not. So, I try to think of all that and I know that the great and talented attorneys and investigators I work with think the same way.

What keeps me motivated in doing my job is when I think of a case I did a long time ago, where I went to visit a customer and I sat across the kitchen table from him. He had put his kids through college. He was very consistent about putting money aside for retirement, and then when he was close to retirement age, he met a broker who went to the same church that he went to and who befriended him. And when he asked for any advice on how to save for retirement this guy took all his money and put it in what he said was a "can't lose" offer, when in fact it was a complete lie.

The broker, who befriended him because they were in the same church, because they shared the love of a golf game, that broker took all of this man's hard-earned retirement savings. And as I sat there across the kitchen table, he was embarrassed and humiliated and to me that was heartbreaking. He didn't want to come forward. He didn't complain. We happened to find him, and we happened to talk to him. And he was so embarrassed. I think about that with every customer who we approach. I think about that with every fraud scheme that we uncover, that there are victims there who are embarrassed and humiliated. And that's so wrong.

Ultimately, we got that man's money back. And I remember getting a note from him thanking us for all the work we did. And in that one moment, sitting across the table from the man who had spent his whole life savings so hard, I think that's when it all matters. It's trying to protect people like that.

24:30 - 24:46

Kaitlyn Kiernan: It's terrible that anyone should feel embarrassed when they were taken advantage of. That's not their fault. And it is a challenge not just for FINRA, but for any organization that looks at fraud, so it's great to hear that your team is doing such great work to help individuals like that.

24:47 - 25:04

Jessica Hopper: It's a challenge, but it's definitely worth it. And for the customers out there who feel embarrassed I can only say, you are only human. People who are kind of get it wrong are counting on you to not come forward. So, I hope if there's any customers out there that they know that we're on their side.

25:05 - 25:22

Kaitlyn Kiernan: Well Jessica thanks for joining us. Listeners if you don't already, make sure you subscribe to FINRA Unscripted on Apple Podcast, Spotify or wherever you listen to podcasts. If you have any ideas for future episodes you can send us an email at [email protected]. Until next time.

25:22 - 25:29

Outro Music

25:29 - 25:57

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