On May 30, the Financial Industry Regulatory Authority published Regulatory Notice 18-16, which seeks comment on proposed rule amendments that impose additional restrictions on members who have brokers who previously engaged in significant misconduct. FINRA seeks comments on the following proposals:

  • The Rule 9200 Series (Disciplinary Proceedings) and the 9300 Series (Review of Disciplinary Proceedings by National Adjudicatory Council and FINRA Board; Application for SEC Review) to allow a Hearing Panel to impose restrictions on member and broker activities while a disciplinary matter is on appeal with the National Adjudicatory Council, and to require members to adopt heightened supervisory procedures for brokers while such appeal is pending;
  • The Rule 9520 Series (Eligibility Proceedings) to require members to adopt heightened supervisory procedures for brokers while a statutory disqualification eligibility request is under FINRA review;
  • Rule 8312 (FINRA BrokerCheck Disclosure) to disclose the status of a member as a “taping firm” under Rule 3170 (Tape Recording of Registered Persons by Certain Firms); and
  • The NASD Rule 1010 Series (Membership Proceedings) to require members to seek a materiality consultation from FINRA’s Department of Member Regulation through the Membership Application Program Group when a natural person has criminal or disciplinary history before becoming an owner, control person, principal or registered person of an existing member firm.

The comment period for these proposals expires on June 29.

Aside from the rule proposals, FINRA has published Regulatory Notice 18-15, which describes members’ existing obligations to implement heightened supervisory procedures under Rule 3110 (Supervision) for high-risk brokers.

Regulatory Notice 18-15 is available here. Regulatory Notice 18-16 is available here.