FINRA has new Sanction Guidelines
FINRA has published Regulatory Notice 17-13 introducing three new Sanction Guidelines: Systemic Supervisory Failures, Short Interest Reporting, and Borrowing From or Lending to Customers.
The summary of the new sanction guidelines from FINRA:
Borrowing From or Lending to Customers: There are large numbers of litigated and settled cases involving borrowing and lending arrangements between registered representatives and customers, but the current iteration of the Sanction Guidelines has no guideline related to these types of violations. The introduction of a guideline related to borrowing and lending arrangements between representatives and customers provides adjudicators with guidance on the assessment of sanctions in these cases.
Click FINRA Sanction Guidelines to read.
Borrowing From or Lending to Customers – Failure to Comply With Rule Requirements
On page 77:
See Principal Considerations in Introductory Section
- The purpose of the loan.
2. The number of loans at issue.
- The number of customers involved in the respondent’s borrowing or lending arrangements.
- Whether the loan was documented through a loan agreement or other written instrument.
- The dollar amount, duration, interest rate, repayment schedule, and other terms of the loan and whether they are reasonable.
- Whether the respondent made payments in conformance with the loan agreement and has repaid, or attempted to repay, the loan.
- The age, financial condition, and financial sophistication of the customer. 8. Whether the respondent made any misrepresentations to the customer.
- Whether the respondent misled his or her employer member firm about the existence of the loan or otherwise concealed the activity from the firm.
Fine of $2,500 to $73,000
Suspension, Bar or Other Sanctions
Consider suspending the respondent for a period of 10 business days to three months.
Where aggravating factors predominate, consider a longer suspension (of up to two years) or a bar.
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