As part of its initiative to reel in high-risk brokers and hold firms accountable who hire them, the Financial Industry Regulatory Authority (FINRA) board of governors approved new proposals Thursday that will improve protections.
The regulator has recently been working to strengthen its controls on brokers who have histories of misconduct and establish repercussions for the firms who hire them, often well aware of their previous wrongdoing. Although the proposals have been approved by the board, FINRA still needs to issue a regulatory notice detailing them and receive comments. That notice will be filed soon, according to a statement from the regulator.
The proposed changes include requiring additional disclosures to FINRA’s BrokerCheck, a database of brokers that details their work histories, licenses and run-ins with the regulators. They would also expand the sanction guidelines and make penalties more severe for brokers with histories of misconduct.Another proposal approved by the board would heighten supervision of brokers appealing any disciplinary matters.
Holding advisory firms more accountable for supervising high-risk brokers was also the focus of a proposal. Specifically, the proposal suggests firms should increase their oversight of brokers while a statutory disqualification request is under review, or the broker is appealing a hearing panel decision.
FINRA also wants to revise the guidelines for reviewing waiver requests by brokers for exam requirements. Regulators submitted a proposal that reviews should take into consideration “past misconduct of an individual, including arbitration awards and settlements.”
In a statement, FINRA President and CEO Robert W. Cook said additional proposals will be brought to the board of governors in the coming months.
FINRA oversees 633,800 brokers and, in 2016, referred more than 785 fraud and insider trading cases for prosecution.