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Your Arbitration History Could Lead to Stiffer Sanctions

By Alex Padalka May 4, 2018

Beginning June 1, brokers caught up in Finra’s disciplinary proceedings could expect tougher sanctions if they also have customer-initiated arbitrations on their record, according to a regulatory notice from the industry’s self-regulator.

Under the new sanctions guidelines Finra recommends adjudicators consider imposing “more stringent sanctions” on representatives with prior arbitration history, according to the notice.

The guidelines currently recommend adjudicators impose “progressively escalating sanctions” on representatives with multiple violations, Finra says -- but they only apply to disciplinary actions similar to the ones in the current case or ones that suggest “reckless disregard for regulatory requirements, investor protection, or market integrity,” according to the notice. The recent change means adjudicators should also take into account previous arbitrations initiated by customers, which have been resolved with an award or settlement, Finra says.

The change doesn’t apply to cases in which arbitrations have been filed but not resolved, nor to cases in which settlements were reached but haven’t had arbitration claims filed prior to the settlement, according to the notice. Furthermore, arbitration claims that were withdrawn or dismissed would not apply either, Finra says. And the revisions only apply to individual representatives and not to member firms, according to the notice.

Finra

Finra hasn’t changed its stance as far as pending investigations or active regulatory proceedings: such cases will not be treated as disciplinary history until there’s a final decision, according to the regulator. The same applies to pending arbitrations, Finra says.