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Finra Hints at Fee Violation Leeway for Self-Reporting

February 14, 2018

Watchdog Finra plans to update its rules on how it treats member firms that self-report violations, although the industry’s self-regulator has fallen short of extending an amnesty the way the SEC has earlier this week, FA magazine writes.

The SEC said it will waive financial penalties on advisors who self-report failures to disclose 12b-1 fees as long as they do so before June 12 and disgorge ill-gotten gains.

Finra isn’t going quite as far just yet, but it will update guidance on “extraordinary cooperation,” self-reporting, restitution and remediation, Susan Schroeder, Finra’s executive vice president of enforcement, said at a Sifma conference on Monday, according to FA magazine.

“We believe strongly in credit for extraordinary cooperation, and restitution and remediation are very important factors for us,”she said, according to the publication.

Remediating clients whom the firm had harmed “is a way that respondents can help themselves and help us effectively resolve matters,” Shroeder said, according to FA magazine. And a Finra spokeswoman, when asked whether Finra would roll out a sister initiative to the SEC’s, pointed to Schroeder’s comments as well as several enforcement cases, the publication writes.


In particular, Finra highlighted the $30 million in restitution it ordered Wells Fargo, Raymond James and LPL to pay in 2015 over mutual fund overcharges, FA magazine writes. That settlement took into account the companies’ detection and self-reporting of their violations, said Brad Bennett, Finra executive vice president and chief of enforcement, according to the publication.

By Alex Padalka