Financial regulator proposes new rule

On behalf of Girard Bengali, APC on Monday, May 13, 2019.

Most brokerage firms and brokers in California and throughout the country take steps to ensure compliance with applicable regulations. However, some do not make an effort to comply with the financial laws and regulations. To help combat this problem, FINRA has proposed a rule that require firms labeled as risky to pay into a fund. This fund would be used to pay judgments rendered against these firms in arbitration.

The regulator says that there is an issue with arbitration awards that have not been paid. Therefore, having such a fund will make it easier to ensure that firms follow through on their obligation to pay. According to FINRA, companies that do not have sufficient oversight can cause investors to doubt the integrity of the brokerage industry. Customers may also doubt the integrity of the markets themselves when brokers have violated securities laws or FINRA regulations.

If the rule were to pass, there would be a greater incentive for firms to stop associating with brokers who have a history of being disciplined for rules violations. Research conducted by FINRA shows that those who have disciplinary issues in the past may have more such issues in the future. Comments on the proposed rule will be accepted until July 1.

Individuals who are facing accusations of violating FINRA rules or securities laws may face serious consequences. In some cases, they may be required to pay a fine or other financial penalties. They could also face the possibility of spending time in jail or losing their ability to work as a broker. An attorney may be able to review a case in an effort to get a charge dismissed or reduced. This may allow a person to move on from a case with his or her reputation intact.

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