FINRA has a newly-revised Sanction Guidelines that's effective immediately.  Among the changes, FINRA has revised the sections dealing with: (i) impeding regulatory investigations;  and (ii) quality of markets.  Changes inclue Specifically, the revisions:

• remove the Minor Rule Violation Plan (MRVP) Letter from the definition of a disciplinary “action” for purposes of considering prior actions and the provision that discusses respondents charging fines and costs to credit cards;

• modify the guidelines for violations related to the sale of unregistered securities to reflect that adjudicators should consider higher fines and firm suspensions in egregious cases;

• [See Discussion, below]  incorporate into the FINRA Rule 8210 guidelines relevant federal court and SEC precedent. The FINRA Rule 8210 guidelines also now delineate principal considerations for the 3 categories of violations.  And for a partial but incomplete response to a FINRA Rule 8210 request, the guidelines now reflect parity with the fine for a failure to respond or respond truthfully;

• [See Discussion, below] expressly provide for restitution or disgorgement in certain trading halt and best execution cases, and amend the suitability guidelines for use in cases where respondents have violated the “Recommendation Rule”;

• add new guidelines for failing to comply with rule requirements related to customer confirmations and extended hours trading risk disclosure;  and, 

• reflect the new FINRA rule numbers for rules that have been adopted into the consolidated FINRA rulebook.

    FINRA staff contacts:  Emily Gordy (Enforcement) at (202) 974-2916;  Louise Corso (Market Regulation) at (240) 386-5241; Jennifer Brooks (General Counsel) at (202) 728-8083.

    Revisions to Impeding Regulatory Investigations Guidelines.   In order to harmonize with federal court and SEC precedent, and to clarify several aspects, FINRA Rule 8210 guidelines were changed.  Revisions reflect that violations of FINRA Rule 8210 threaten FINRA’s ability to ensure investor protection and market integrity and should, in appropriate cases, result in significant sanctions to protect the public from industry members who prevent FINRA from fully investigating their activities.  Among other things, the revisions delineate principal considerations for the 3 categories of violations under FINRA Rule 8210:  (i) failure to respond or to respond truthfully;  (ii) providing a partial but incomplete response;  (iii) failure to respond in a timely manner.

To emphasize the seriousness of failing to provide FINRA with complete information, the guidelines revise the high end of the fine range for a partial but incomplete response from $25K to $50K, and states that a bar is recommended for a partial but incomplete response unless the person can demonstrate that the information provided substantially complied with all aspects of the information request.  [C-I Note:  Guilty until proven innocent.]

    Revisions to Quality of Markets Guideline.   As revised, the Guidelines expressly allow for restitution or disgorgement in cases where respondents have executed trades or published quotes or IOI's during a trading halt in violation of FINRA Rules 2010 and 5260, and where respondents failed to comply with best ex requirements under FINRA Rule 2010 and NASD Rule 2320.

To access the revised Guidelines, go to:   [FINRA Sanction Guidelines, February 2011].