FINRA is considering filing a rule proposal that would empower it to use court proceedings for collecting restitution that brokerages and brokers have to pay in disciplinary cases. FINRA chairman, Richard Ketchum said the proposal comes following the Second U.S. Circuit Court of Appeals in New York ruling that the regulator could not enforce its fines by filing lawsuits.  The October decision, which threw out a $1.3 million judgment against in Fiero Brothers Inc, a now-defunct New York-based brokerage, and its president John J. Fiero, did not address the question of restitution, said Ketchum. Regulators order brokers and firms to pay restitution in disciplinary cases to reimburse harmed investors for funds they lost because of wrongdoing. Imposing fines serves the additional purpose of punishing brokers and firms for their actions and trying to deter further misconduct within the industry. "To the extent that a customer has been harmed and we're able to track that, we really think that it is appropriate for a (self-regulatory organization) to go beyond" its own enforcement proceedings to collect those funds, said Ketchum. While FINRA does not agree with the Fiero decision, it has not been "very important" to the regulator's efforts to collect fines, said Ketchum. "We don't have a big collection problem in the industry except when a firm leaves the industry." The rule would require approval by the S.E.C.  [Reuters 12/16/11]