Proposed New FINRA Rule on Firms with a Significant History of Misconduct

3rd May 2019

The proposed rule could require a high-risk firm to deposit a specific amount of cash or qualified securities into a separate account at a bank or clearing firm, which could not be withdrawn without FINRA’s prior written consent. The proposal also aims to preserve funds for payment of arbitration awards.

According to FINRA, recent academic studies have provided evidence that past disciplinary and regulatory events associated with a firm or individual can be predictive of similar future events. The proposal would further promote investor protection and market integrity and give FINRA another tool to incentivize member firms to comply with regulatory requirements and to pay arbitration awards.”

Click here for FINRA’s proposed Rule 4111