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FINRA Adopts Rules to Address Brokers With a Significant History of Misconduct
Friday, March 12, 2021

On March 10, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 21-09 announcing FINRA’s adoption of new rules to address brokers with a significant history of misconduct and the broker-dealers that employ them. FINRA adopted the following rules:

  • Amendments to the Rule 9200 Series (Disciplinary Proceedings) and the Rule 9300 Series (Review of Disciplinary Proceeding by National Adjudicatory Council and FINRA Board; Application for SEC Review) authorize Hearing Officers to impose conditions and restrictions on disciplined Respondents, and require member firms to adopt heightened supervision plans regarding associated persons who are disciplined Respondents.

  • Amendments to Rule 9556 (Failure to Comply with Temporary and Permanent Cease and Desist Orders, or Orders that Impose Conditions or Restrictions) grant FINRA staff the authority to bring an expedited proceeding against a Respondent that fails to comply with conditions and restrictions imposed by Hearing Officers and create the process for the new expedited proceeding.

  • Amendments to Rule 9522 (Initiation of Eligibility Proceeding; Member Regulation Consideration; and Requirements for an Interim Plan of Heightened Supervision) require a member firm that files an application to continue associating with a disqualified person to include an interim heightened supervision plan that would be in effect throughout the application review process.

  • Amendments to Rule 8312 (FINRA BrokerCheck Disclosure) require FINRA to release through BrokerCheck which firms are “taping firms,” which are member firms with a specified percentage of registered persons who have been associated with disciplined firms in a registered capacity in the last three years.

  • Amendments to Rule 1000 Series (Member Application and Associated Person Registration), among other things, require a member firm to file a continuing membership application (CMA) when a natural person seeking to become an owner, control person, principal or registered person of the member has one or more “final criminal matters” or two or more “specified risk events” in the prior five years.

The above rule changes also apply to capital acquisition brokers (CABs), and FINRA amended CAB Rule 111 and Funding Portal Rule 900(b) to reflect those changes.

Amendments to FINRA Rule 9200 Series, FINRA Rule 9300 Series, and FINRA Rule 9556 become effective April 15. Amendments to FINRA Rule 8312 become effective May 1. Amendments to FINRA Rule 9520 Series and Funding Portal Rule 900 become effective June 1. Amendments to FINRA Rule 1000 Series and the Capital Acquisition Broker Rule 100 Series become effective September 1.

Regulatory Notice 21-09.

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