FINRA to begin going after high-risk brokers


Among the thousands of new tools available to investors, there are now some that judge “social” sentiment among Twitter and Reddit users. Some brokers may be using this sentiment profile to target clientele to invest in high-risk investments. FINRA has now been authorized by the SEC to pursue broker-dealers and financial advisors who engage in this practice and crack down on inappropriate recommendations of high risk investments by unscrupulous brokers.

SEC-approved crackdown

Recently, FINRA was approved by the SEC to place new obligations on these high risk broker-dealers. The SEC explained that this new rule will help address the issue of associated persons with a significant history of misconduct and the broker-dealers that employ them.

These high risk brokers will have new disclosure requirements, have increased cash requirements, segregated securities accounts and they must follow new restrictions and obligations.

The new rules

Through FINRA Rule 4111, FINRA Rule 9561 and FINRA Rule 9559, these new procedures will go into place. With these new rules, there will be new hearing procedures and expedited processing timelines.

The goal, of course, is to help protect investors from broker misconduct. These high risk broker-dealers expose their investors to real and significant risk. Indeed, some of these broker-dealers concentrate on high producing, hard sale brokers that have a history of misconduct, and then fail to properly supervise and turn a blind eye to inappropriate or fraudulent conduct that benefits the broker-dealer and injures the client.

A key takeaway for our readers is that broker misconduct is real. It is a real problem that even the SEC and FINRA are having trouble battling on a regulatory basis. investors who fall victims to broker misconduct and unsuitable recommendations should seek counsel who specialize in securities litigation and arbitration and have a proven history of real results of getting clients’ money back through trial, arbitration, mediation or settlement. .