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Technical Matters [Version up to May. 1, 2018]

Calculation of days of suspension. As was the case in prior versions of the FINRA Sanction Guidelines, recommendations for the imposition of suspensions contained herein distinguish between suspensions for 30 or fewer days and 31 or more days. In these guidelines, the NAC recommends that a suspension of 30 or fewer days be measured in business days, while a suspension of 31 or more days be measured in calendar days.

Censures. These guidelines do not specifically recommend whether or not Adjudicators should impose censures under any of the individual sanction guidelines for particular violations. In the following two instances, however, Adjudicators generally should not impose censures: 1) in cases in which the total monetary sanction (fines, disgorgement, and restitution) is $7,000 or less and the disciplinary action (regardless of the number of violations alleged) involves the violations indicated in Schedule A to these guidelines; and 2) in cases in which an Adjudicator imposes a bar, expulsion or suspension. Adjudicators should impose censures in cases in which fines above $7,000 are reduced or eliminated due to a respondent's inability to pay or bankruptcy. Adjudicators also may impose censures in cases in which this policy would suggest no censure if the Adjudicator determines that extraordinary circumstances exist.2

Change in terminology; "actions" replaces "violations." Many of the guidelines recommend progressively escalating monetary sanctions for second and subsequent disciplinary "actions." The term "actions" is used to acknowledge that every violation of a rule will not necessarily rise to the level of a formal disciplinary action by FINRA, and also to reflect that, as discussed herein, multiple violations may be aggregated or "batched" into one "action" (see General Principle no. 4).

An "action" means a Letter of Acceptance, Waiver and Consent (AWC), a settled case or a fully litigated case. FINRA Regulation staff-issued Cautionary Action Letters and staff interviews are informal actions that are not included for purposes of the FINRA Sanction Guidelines in the term "action."

Fines. Fines may be imposed individually as to each respondent in a case, or jointly and severally as to two or more respondents.

Monetary sanctions—Imposition and collection of monetary sanctions.

FINRA has identified the circumstances under which Adjudicators generally will impose and FINRA generally will collect monetary sanctions. In that the overriding purpose of all disciplinary sanctions is to remedy misconduct, deter future misconduct and protect the investing public, Adjudicators may exercise their discretion in applying FINRA's policy on the imposition and collection of monetary sanctions as necessary to achieve FINRA's regulatory purposes. The following lists of violations may not be exhaustive and these recommendations also may be appropriate for other types of cases.3

•   Adjudicators generally should not impose a fine if an individual is barred and there is no customer loss in cases involving the following types of misconduct:
•   failure to respond under FINRA Rule 8210;
•   exam cheating; and
•   private securities transactions (if the Adjudicator does not order disgorgement or restitution).
•   Adjudicators generally should not impose a fine if an individual is barred and the Adjudicator has ordered restitution or disgorgement of ill-gotten gains as appropriate to remediate the misconduct in cases involving the following types of misconduct:
•   conversion or improper use of funds or securities;
•   forgery; and
•   sales practice and private securities transaction cases (if only one or a small number of customers are harmed).
•   Adjudicators generally should impose a fine and require payment of restitution and disgorgement even if an individual is barred in all sales practice cases if:
•   the case involves widespread, significant and identifiable customer harm; or
•   the respondent has retained substantial ill-gotten gains.
•   In all cases, Adjudicators may exercise their discretion and, if a bar is imposed, refrain from imposing a fine, but require proof of payment of an order of restitution when a respondent files an application for re-entry into the securities industry4 Adjudicators also may, in their discretion, impose a suspension and a fine, but require proof of payment of the fine when the respondent re-enters the securities industry. In this regard, Adjudicators should consider the following factors:
•   whether the respondent is suspended or otherwise not in the securities industry when the sanction is imposed; and
•   the number of customers harmed.

Monetary sanctions—payment of monetary sanctions. Respondents may be permitted to pay fines and costs through an installment payment plan. Installment payment plans generally will be limited to two years (although in extraordinary cases, installment payment plans may be extended to not more than five years). Respondents who are allowed to utilize an installment payment plan will be required to execute promissory notes that track the installment payment plan.

Organization. These guidelines are organized into 11 subject-matter categories and arranged alphabetically by name in each category. In addition, the index lists all the guidelines alphabetically by name.

Restitution—Payment of interest. When ordering restitution, Adjudicators may consider requiring the payment of interest on the base amount. Generally, interest runs from the date(s) of the violative conduct and should be calculated at the rate established for the underpayment of federal income tax in Section 6621 of the Internal Revenue Code, 26 U.S.C. Section 6621(a)(2). If appropriate, Adjudicators may order payment to a state escheat fund of any amount that a respondent is not able to pay in restitution because he or she is unable, after reasonable and documented efforts, to locate a customer or other party to whom payment is owed.

Suspensions, bars and expulsions. These guidelines recommend suspensions that do not exceed two years. This upper limit is recommended because of the NAC's sense that, absent extra ordinary circumstances, any misconduct so serious as to merit a suspension of more than two years probably should warrant a bar (of an individual) or expulsion (of a member firm) from the securities industry. Notwithstanding the NAC's recommendation in these guidelines to impose suspensions that do not exceed two years, under FINRA's rules, an Adjudicator may suspend the membership of a member or the registration of a person associated with a member for a definite period that may exceed two years or for an indefinite period with a termination contingent on the performance of a particular act.

It should be noted that an individual who is barred from associating with a member firm in any capacity generally may not re-enter the industry. Although a barred individual may seek special permission to re-enter the industry via FINRA's eligibility process, to date, the NAC has disfavored applications for re-entry.5

2. Interested parties are directed to NASD Notice to Members 99-91 (November 1999) for additional information on FINRA's Censure Policy.

3. Interested parties are directed to NASD Notice to Members 99-86 (October 1999) for additional information on FINRA's Monetary Sanctions Policy.

4. Adjudicators have the discretion to impose post-judgment interest on restitution orders.

5. In Securities Exchange Act Release No. 34720 (September 26, 1994), Securities and Exchange Commission staff indicated in a letter to various self-regulatory organizations, including FINRA, that "[h]enceforth, imposition of an unqualified bar evidences the Commission's conclusion that the public interest is served by permanently excluding the barred person from the securities industry. Accordingly, absent extraordinary circumstances, a person subject to an unqualified bar will be unable to establish that it is in the public interest to permit reentry to the securities industry."