DISPUTE RESOLUTION

Enforcement

FINRA’s 529 Plan Share Class Initiative Encourages Firms to Self-Report Potential Violations

Over the past several years, FINRA has found that some firms have failed to reasonably supervise brokers’ recommendations of multi-share class products. FINRA has raised concerns specifically regarding firms’ supervision of share-class recommendations to customers of 529 savings plans. FINRA is launching a 529 Plan Share Class Initiative to promote firms’ compliance with the rules governing 529 plan recommendations, to promptly remedy potential supervisory and suitability violations related to recommendations that customers of 529 plans buy share classes that are inconsistent with the accounts’ investment objectives, and to return money to harmed investors as quickly and efficiently as possible. As described in this Notice, to encourage voluntary reporting under this initiative, FINRA’s Department of Enforcement will recommend that FINRA accept favorable settlement terms for firms that self-report these potential violations and provide FINRA with a detailed remediation plan.

FINRA Regulatory Notice 19-04 (January 28, 2019): FINRA’s 529 Plan Share Class Initiative Encourages Firms to Self-Report Potential Violations

 


(Updated) FINRA Revises the Sanction Guidelines

FINRA revised its Sanction Guidelines to instruct adjudicators in the disciplinary process to consider customer-initiated arbitrations that result in adverse arbitration awards or settlements when assessing sanctions. Thus, when a respondent’s disciplinary history, and history of arbitration awards and arbitration settlements together with the violation found in a disciplinary case, form a pattern, the Sanction Guidelines advise that adjudicators should consider imposing more stringent sanctions. The revisions took effect for all complaints filed in FINRA’s disciplinary system beginning on June 1, 2018.

FINRA Regulatory Notice 18-17 (May 2, 2018): FINRA Revises the Sanction Guidelines

FINRA Regulatory Notice 19-07 (March 1, 2019): FINRA Revises Indexed Amounts for Monetary Sanctions in the Sanction Guidelines

General

Simplified Arbitration

FINRA has amended its rules to provide a new option for simplified arbitration. The amendments provide an additional hearing option for parties in arbitration with claims of $50,000 or less, excluding interest and expenses. The amendments became effective on September 17, 2018.

FINRA Regulatory Notice 18-21 (July 23, 2018): SEC Approves Amendments to Arbitration Codes to Provide an Additional Hearing Option in Simplified Arbitration

 

Definition of Non-Public Arbitrator

The SEC approved amendments to the definition of non-public arbitrator in the Customer and Industry Codes of Arbitration Procedure. The amended definition provides that a non-public arbitrator is a person who is otherwise qualified to serve as an arbitrator, and is disqualified from service as a public arbitrator under the Codes. The amendments became effective on October 9, 2017.

•  FINRA Regulatory Notice 17-29 (October 2017):  SEC Approves Amendments to Arbitration Codes to Revise the Definition of Non-Public Arbitrator