Ford O'Brien, LLP

How can I reduce the severity of FINRA disciplinary actions?

A Financial Industry Regulatory Authority (FINRA) investigation under Rule 8210 isn’t something to panic about. Nor is it something to take lightly. Depending on the regulatory agency’s findings, yourself or your firm may face severe penalties. That can include a temporary or permanent ban from the industry or monetary fines.

There is an opportunity to help lighten the discipline, however.

The influence of extraordinary cooperation

FINRA wants its disciplinary actions to be remedial while also strong enough to prevent any future misconduct. The agency believes firms and individuals can support these goals of remediation and prevention – which is why it takes extraordinary cooperation into account when determining disciplinary actions. (Source: “FINRA Supplements Prior Guidance on Credit for Extraordinary Cooperation,” FINRA.org)

If FINRA believes a firm or individual that has been the subject of an investigation makes a clear, proactive effort to cooperate, then the agency’s Enforcement division might recommend sanctions well below what the guidelines call for. That could include forgoing discipline entirely.

Defining extraordinary cooperation

When determining what types of activities qualify as extraordinary cooperation, FINRA looks at four factors. That includes whether the firm or individual:

  • Accepted responsibility for and acknowledged misconduct before outside intervention
  • Voluntarily put corrective measures into place before outside intervention, including to prevent recurrence
  • Voluntarily and reasonably tried to remedy the misconduct, including by paying restitution if applicable
  • Offered “substantial assistance” to FINRA during its examination or investigation into the matter

Note that FINRA already requires basic levels of cooperation. In order to reach the “extraordinary” threshold, the firm or individual’s actions must go above and beyond general compliance.

Don’t make your case alone

In all instances where you or your firm are potentially facing a regulatory investigation, it is vital to have the support of a dedicated law firm. An attorney can offer guidance and advice as you handle the matter. In addition, a lawyer can advocate on your behalf, and depending on the circumstances can help make the case to regulators that you have shown the type of cooperation they are looking for.

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