FINRA adopted new rules to "address brokers with a significant history of misconduct and the broker-dealers that employ them."
The new rules, among other things:
- enable a hearing officer to (i) impose restrictions on the activities of a respondent member firm or associated person and (ii) mandate that a member firm employing an accused "bad boy" adopt heightened supervisory measures during the course of any appeal;
- require member firms to impose heightened supervisory measures for statutorily disqualified associated persons while a statutory disqualification eligibility request is being reviewed by FINRA;
- mandate FINRA BrokerCheck® disclosure concerning the status of a member firm as a "taping firm," as defined under FINRA Rule 3170 ("Tape Recording of Registered Persons by Certain Firms"); and
- require that a member firm provide FINRA's Department of Member Regulation, through the Membership Application Group, with a written request for a materiality consultation and the approval of a continuing membership application if certain "bad boys" are to become an owner, control person principal or registered person of the firm.
The amendments to the FINRA Rule 9200 Series ("Disciplinary Proceedings") and 9300 Series ("Review of Disciplinary Proceeding by National Adjudicatory Council and FINRA Board; Application for SEC Review") and to FINRA Rule 9556 ("Failure to Comply with Temporary and Permanent Cease and Desist Orders, or Orders That Impose Conditions or Restrictions") will go into effect on April 15, 2021.
The amendments to FINRA Rule 8312 ("FINRA BrokerCheck Disclosure") will go into effect on May 1, 2021.
The amendments to the FINRA Rule 9520 Series ("Eligibility Proceedings") and Funding Portal Rule 900 ("Code of Procedure") will go into effect on June 1, 2021.
The amendments to the FINRA Rule 1000 Series ("Member Application and Associated Person Registration") and Capital Acquisition Broker Rule 100 Series ("Member Application and Associated Person Registration") will go into effect on September 1, 2021.
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