April Disciplinary Actions

Disciplinary Actions by FINRA: April 2020

FINRA publishes a monthly review of disciplinary actions taken against both firms and individuals. These disciplinary actions are useful tools to look for trends in violations and other sanctions. These trends can assist you in identifying weak areas in your firm’s compliance programs or surveillance. Below is a list of a few key actions from last month.

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AML and Suitability

AML and Suitability Challenges During COVID-19

FINRA Rule 3310 provides broker-dealer guidance on how to design, test, and enforce a firm’s Anti-Money Laundering Program (“AML”). One main element of AML is to “establish and implement policies and procedures that can be reasonably expected to detect and cause the reporting of transactions required under 31 U.S.C. 5318(g) and the implementing regulations thereunder.” FINRA Notice to Members 19-10 identified a key list of red flags that may be used to help identify suspicious activity in trading, money movements, insurance, and securities.

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quantitative suitability

Quantitative Suitability – FINRA Rule 2111

Welcome to the third and final part in our series on the three main suitability obligations outlined in FINRA Rule 2111 (Suitability). As with our earlier posts, “FINRA Rule 2111: Reasonable-Basis Suitability” and “FINRA Rule 2111: Customer-Specific Suitability”, we will begin with a brief overview of the three main suitability obligations imposed on broker-dealers and their associated persons; then, this particular blog will focus in on Quantitative Suitability.

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Customer-Specific Suitability

Customer-Specific Suitability-FINRA Rule 2111

This post is the second in our three-part series on the three separate and distinct suitability obligations outlined in FINRA Rule 2111 (Suitability). As with our previous post, “FINRA Rule 2111: Reasonable-Basis Suitability”, we will begin with a brief overview of the three main suitability obligations imposed on broker-dealers and their registered representatives; then, this particular blog will focus in on Customer-Specific Suitability.

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Reasonable-Basis Suitability

Reasonable-Basis Suitability – FINRA Rule 2111

Although suitability is a well-established principle within the securities industry, broker-dealers and their registered representatives sometimes forget that FINRA Rule 2111 (Suitability) has three separate and distinct suitability obligations. We will begin with an overview of all three main suitability obligations. Then, we will be going in-depth on these areas across three different blogs; this particular blog will focus in on Reasonable-Basis Suitability.

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FINRA Rule 2111: Getting to Know Your Client

Suitability is one of the most important concepts for an investment professional to understand.  Before an investment professional can make recommendations or decisions on behalf of an investor, he must understand what investments are suitable for the investor’s account.  The purpose of FINRA establishing the suitability standard, FINRA Rule 2111, is so that brokers deal fairly with their customers.  FINRA Rule 2111 states that firms and their associated persons “must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer.” Read More…