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Protecting Investors from Misconduct

FINRA uses a combination of tools to reduce the risk of harm to investors by member firms and brokers they may hire that have a history of misconduct.

These tools—including assessments of applications member firms file to retain or employ an individual subject to a statutory disqualification, reviews of membership and continuing membership applications, disclosure of brokers’ regulatory backgrounds, supervision requirements, focused examinations, risk monitoring and disciplinary actions—have been effective in identifying and addressing a range of misconduct by individuals and firms.

FINRA has strengthened its programs to address the risks associated with individual brokers and member firms that have a history of misconduct.

As part of this effort, FINRA has:

Additionally, ridding the industry of brokers engaged in fraud or other egregious misconduct remains one of FINRA’s top enforcement priorities—especially brokers with a history of violations.

Rules

FINRA has rules that specifically address brokers and firms with a significant history of misconduct.

Brokers with a Significant History of Misconduct

In March 2021, FINRA announced the adoption of new rules to address brokers with a significant history of misconduct and the broker-dealers that employ them. The new rules:

  • allow a Hearing Officer to impose conditions or restrictions on the activities of a Respondent member firm or Respondent associated person, and require the member firm employing a Respondent associated person to adopt heightened supervisory procedures for such an associated person, when a disciplinary matter is appealed to the National Adjudicatory Council (NAC) or called for NAC review;
  • require member firms to adopt heightened supervisory procedures for statutorily disqualified associated persons during the period a statutory disqualification eligibility request is under review by FINRA;
  • require disclosure through FINRA BrokerCheck® of the status of a member firm as a “taping firm” under FINRA Rule 3170 (Tape Recording of Registered Persons by Certain Firms); and
  • require a member firm to submit a written request to FINRA’s Department of Member Supervision, through the Membership Application Group, seeking a materiality consultation and approval of a continuing membership application, if required, when a natural person seeking to become an owner, control person, principal or registered person of the member firm has, in the prior five years, one or more “final criminal matters” or two or more “specified risk events.”

Firms with a Significant History of Misconduct

FINRA Rule 4111 augments FINRA’s existing tools to more quickly address firms with a significant history of misconduct, including firms with a high concentration of individuals with a significant history of misconduct. The Securities and Exchange Commission approved the rule in July 2021, and it became effective on January 1, 2022.

Rule 4111 allows FINRA to impose new obligations on broker-dealers with significantly higher levels of risk-related disclosures than other similarly sized peers, based on numeric, threshold-based criteria. It establishes a multi-step, annual process through which FINRA will determine whether a member firm raises investor protection concerns substantial enough to require that it be designated (or re-designated) as a “Restricted Firm” and subject to additional obligations.

Rule 4111 (Restricted Firm Obligations)
Click to enlarge.

The obligations that FINRA can impose on a Restricted Firm include a requirement to deposit cash or qualified securities in a segregated, restricted account, and other conditions and restrictions that are necessary or appropriate for the protection of investors and in the public interest.

Rule 4111 Compliance Tool – Lists of Expelled Firms

FINRA Rule 4111 (Restricted Firm Obligations) requires member firms that are identified as Restricted Firms to deposit cash or qualified securities in a segregated, restricted account; adhere to specified conditions or restrictions; or comply with a combination of such obligations. Rule 4111 establishes a multi-step, annual process through which FINRA will determine whether a member firm raises investor protection concerns substantial enough to require that it be designated (or re-designated) as a Restricted Firm and subject to additional obligations, including a Restricted Deposit Requirement.1 Each year’s process will begin with a calculation of which firms meet numeric thresholds based on firm-level and individual-level disclosure events to identify member firms with a significantly higher level of risk-related disclosures as compared to similarly sized peers.2  

One of the metrics that is relevant to this annual calculation is the Expelled Firm Association Metric.3 This metric is impacted by the number of Registered Persons Associated with Previously Expelled Firms, which is defined to mean any Registered Person In-Scope who was registered for at least one year with a previously expelled firm and whose registration with the previously expelled firm terminated during the Evaluation Period.4 The Evaluation Period, for this purpose, means the prior five years from the Evaluation Date.5    

To assist firms in understanding Rule 4111—and, in particular, the Expelled Firm Association Metric—below are lists of firms that were expelled within the prior five years from the specified Evaluation Dates. These lists are updated as needed to add new expelled firms. This page also will be updated, as appropriate, to add lists relating to future Evaluation Dates and to remove lists relating to past Evaluation Dates.

Firms expelled within the prior five years from the 6/1/2022 Rule 4111 Evaluation Date (last updated 4/11/2022)

  • ACAP FINANCIAL INC. (CRD# 7731)
  • ACCELERATED CAPITAL GROUP (CRD# 41270)
  • AVALON INVESTMENT & SECURITIES GROUP, INC. (CRD# 6281)
  • CAPITAL GUARDIAN, LLC (CRD# 137919)
  • CDK FINANCIAL SERVICES, LLC (CRD# 124333)
  • CLINGER & CO., INC. (CRD# 1471)
  • CP CAPITAL SECURITIES (CRD# 15029)
  • CPIBD LLC (CRD# 46049)
  • CRAIG SCOTT CAPITAL, LLC (CRD# 155924)
  • CV BROKERAGE, INC (CRD# 462)
  • EDI FINANCIAL, INC. (CRD# 15699)
  • ESSEX RADEZ LLC (CRD# 34649)
  • FINANCIAL WEST GROUP (CRD# 16668)
  • FULCRUM SECURITIES, LLC (CRD# 140084)
  • FURTHER LANE SECURITIES, L.P. (CRD# 38162)
  • G - W BROKERAGE GROUP, INC. (CRD# 22691)
  • GLOBAL EMERGING CAPITAL GROUP, LLC (CRD# 130120)
  • HALLMARK INVESTMENTS, INC. (CRD# 135003)
  • ICV GROUP, INC. (CRD# 294024)
  • IMS SECURITIES, INC. (CRD# 35567)
  • JOHN JAMES INVESTMENTS, LTD. (CRD# 37672)
  • KJM SECURITIES, INC. (CRD# 20277)
  • M. ZUCKER, INC. (CRD# 5467)
  • MCNAMEE LAWRENCE SECURITIES, LLC (CRD# 46941)
  • MIDTOWN PARTNERS (CRD# 104223)
  • MIP GLOBAL, INC. (CRD# 164640)
  • NEWPORT COAST SECURITIES, INC. (CRD# 16944)
  • PALADIN MARKET ADVISORS, LLC (CRD# 13281)
  • POTOMAC CAPITAL MARKETS, LLC (CRD# 39800)
  • PTX SECURITIES, LLC (CRD# 7735)
  • ROBERT R. MEREDITH & CO., INC. (CRD# 29501)
  • SANDLAPPER SECURITIES, LLC (CRD# 137906)
  • SISK INVESTMENT SERVICES, INC. (CRD# 19406)
  • SPENCER EDWARDS, INC. (CRD# 22067)
  • STRATFORD PARTNERS (CRD# 164954)
  • TITUS ROCKEFELLER, LLC (CRD# 43608)
  • WINDSOR STREET CAPITAL, LP (CRD# 34171)
  • WORLD-XECUTION STRATEGIES (CRD# 134645)
  • WYCHE SECURITIES, INC. (CRD# 40772)

Firms expelled within the prior five years from the 6/1/2023 Rule 4111 Evaluation Date (last updated 8/17/2022)

  • ACANTHUS (CRD# 296836)
  • ACCELERATED CAPITAL GROUP (CRD# 41270)
  • AVALON INVESTMENT & SECURITIES GROUP, INC. (CRD# 6281)
  • CDK FINANCIAL SERVICES, LLC (CRD# 124333)
  • CLINGER & CO., INC. (CRD# 1471)
  • CPIBD LLC (CRD# 46049)
  • CV BROKERAGE, INC (CRD# 462)
  • ESSEX RADEZ LLC (CRD# 34649)
  • FINANCIAL WEST GROUP (CRD# 16668)
  • ICV GROUP, INC. (CRD# 294024)
  • IMS SECURITIES, INC. (CRD# 35567)
  • KJM SECURITIES, INC. (CRD# 20277)
  • LAM SECURITIES INVESTMENTS, INC. (CRD# 17037)
  • M. ZUCKER, INC. (CRD# 5467)
  • MCNAMEE LAWRENCE SECURITIES, LLC (CRD# 46941)
  • MIDTOWN PARTNERS (CRD# 104223)
  • NEWPORT COAST SECURITIES, INC. (CRD# 16944)
  • PALADIN MARKET ADVISORS, LLC (CRD# 13281)
  • POTOMAC CAPITAL MARKETS, LLC (CRD# 39800)
  • PTX SECURITIES, LLC (CRD# 7735)
  • ROBERT R. MEREDITH & CO., INC. (CRD# 29501)
  • SANDLAPPER SECURITIES, LLC (CRD# 137906)
  • SISK INVESTMENT SERVICES, INC. (CRD# 19406)
  • SPENCER EDWARDS, INC. (CRD# 22067)
  • STRATFORD PARTNERS (CRD# 164954)
  • TITUS ROCKEFELLER, LLC (CRD# 43608)
  • USTOCKTRADE SECURITIES, INC. (CRD# 16208)
  • WORDEN CAPITAL MANAGEMENT LLC (CRD# 148366)
  • WORLD-XECUTION STRATEGIES (CRD# 134645)
  • WYNSTON HILL CAPITAL, LLC (CRD# 103811)

1 For more information about Rule 4111, see Regulatory Notice 21-34 and Information Notice 02/01/2022.

2 See Rule 4111(i)(9) (defining the “Preliminary Criteria for Identification”); 4111(i)(11) (defining “Preliminary Identification Metrics Thresholds” and displaying numeric thresholds for seven firm-size categories).

3 See Rule 4111(i)(10)(F) (defining the “Expelled Firm Association Metric”).

4 See Rule 4111(i)(4)(F) (defining “Registered Persons Associated with Previously Expelled Firms”); see also Rule 4111(i)(13) (defining “Registered Persons In-Scope”).

5 See Rule 4111(i)(6) (defining “Evaluation Period”); see also Rule 4111(i)(5) (defining “Evaluation Date”).