Brokerages Have a New Path to Avoid Formal Regulatory Investigations

Subscribe to enjoy similar stories.Brokerage firms facing scrutiny over a potential compliance violation have long been able to help their cause by engaging with regulators throughout the process. Now Finra, the brokerage industry’s self-regulatory organization, is piloting a new self-reporting initiative that could bring Finra’s inquiries to an end sooner and potentially avoid penalties.Leaders of Finra’s enforcement division described reforms to the organization’s processes at a recent conference in Washington, stressing the importance of volunteering information that could help regulators understand more about the firm’s operations, what might have gone wrong from a compliance perspective, and what the firm is doing to address the issue.At the outset of an investigation, Finra is inviting firms, along with their outside counsel, to sit for an introductory meeting.

That enables the regulator and the firm to compare notes and for the firm to proactively furnish information without waiting for the formal request from Finra staff. It also gives the firm an opportunity to outline remedial steps it has taken on its own to address any compliance deficiencies, which can be a major factor in how harsh a penalty the firm receives.“We take that into account, of course, when determining the outcome of our cases,” said Bill Thompson, vice president and chief counsel at Finra’s enforcement division.Further along in the investigative process, near the end of the fact-finding phase, Finra has been inviting firms in for what its calls an investigative findings meeting, when enforcement staff can share what they have learned and give the firm a chance to respond ahead of moving to “get everyone on the same page,” said Matt Minerva,