Wall Street's Top Cop FINRA Beefs Up Its Sanctions Guidelines


Wall Street's self-policing body unveiled tough new sanctions guidelines on Tuesday that call for stricter penalties against defendants who commit fraud or violate suitability rules.

The new guidelines by the Financial Industry Regulatory Authority call for possibly expelling firms or barring individuals who commit fraud, and increasing the range of suspensions from one to two years against brokers who sell products that are not suitable to retail investors.

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In some cases, FINRA's new guidelines will also increase the amount of monetary sanctions by indexing them to the Consumer Price Index.

The changes unveiled Tuesday by FINRA come about a year after FINRA Chief Executive Richard Ketchum told Reuters in an exclusive interview that it would review the guidelines. The watchdog group's National Adjudicatory Council, FINRA's 14-member appellate tribunal for disciplinary cases, took on the task.

That review came on the heels of criticism from U.S. Securities and Exchange Commission Democratic member Kara Stein, who said last year she felt FINRA's penalties are "too often financially insignificant" for wrongdoers.

FINRA's oversight of Wall Street brokers has faced scrutiny in recent years from how it supervises problem brokers to the way it vets arbitrators tasked with overseeing cases.

Ketchum has sought to address those concerns. Last year, for instance, FINRA imposed mandatory background checks for brokers every five years.

In a notice published on Tuesday, FINRA said that its new sanctions guidelines are designed to "protect the investing public by deterring misconduct and upholding high standards of business conduct." (Reporting by Sarah N. Lynch; Editing by Susan Heavey)