Here’s What FINRA’s Adoption of Two Major Rule Changes Means For You

The Financial Industry Regulatory Authority (FINRA) has announced the adoption of two significant rule changes, both of which attempt to address brokers and firms with a substantial history of misconduct. One change involves an amendment to FINRA’s Membership Application Program (MAP), while the other imposes strict penalties for firms designated as “Restricted Firms” due to their history and pattern of misconduct. Here’s what brokerage firms and financial advisors need to know about these recent changes.

Changes to FINRA’s Membership Application Program (MAP)

FINRA recently released Regulatory Notice 21-09, outlining new rules to address brokers with a significant history of misconduct. These new rules went into effect on September 1, 2021. Under these new rules, a member firm must submit a written request to FINRA’s Department of Member Regulation (through the Membership Application Group) when an individual seeking to become a principal or registered member of the firm has a history of misconduct. The written request will seek a “materiality consultation and approval of a continuing membership application,” in the event that any firm member has, “in the prior five years, one or more ‘final criminal matters’ or two or more ‘specified risk events.’”

New Financial Penalties for “Restricted Firms”

On July 30, 2021, the Securities and Exchange Commission (SEC) formally approved FINRA’s proposed adoption of Rule 4111. This rule, known as “Restricted Firm Obligations,” requires member firms identified as “Restricted Firms” to adhere to specified conditions and restrictions. For instance, FINRA may compel a newly-designated Restricted Firm to deposit cash or qualified securities in a separate account to penalize such firms for their tendency to engage in or perpetuate a culture of misconduct. Additional restrictions or obligations may be imposed against these firms as necessary.

Moving Forward in the Wake of These New Rules

Whenever FINRA adopts new changes, it’s natural for financial advisors and brokerage firms to have questions. If you have concerns about how these new rules may affect your professional reputation, seek out the assistance of a knowledgeable securities law attorney to discuss the specifics of your situation. It can be challenging to wrap our heads around the implications of these new rules and penalties, so enlist the guidance of a trusted attorney to help you gain the clarity you need to move forward.


If you have questions about what these new FINRA rules may mean for you, call Judex Law LLC today at (303) 523-4022 to discuss your concerns with an experienced securities law attorney.

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