FINRA Files Proposed Rule Change to Address Firms With History of Misconduct
On November 16, the Financial Industry Regulatory Authority (FINRA) filed with the Securities and Exchange Commission a proposed rule change to (1) adopt FINRA Rule 4111 (Restricted Firm Obligations), which would impose additional conditions on member firms with a history of misconduct; and (2) adopt FINRA Rule 9561 (Procedures for Regulating Activities Under Rule 4111) and amend FINRA Rule 9559 (Hearing Procedures for Expedited Proceedings Under the Rule 9550 Series) to create a new expedited proceeding to implement proposed Rule 4111.
Specifically, FINRA Rule 4111 would require member firms that have significantly higher levels of risk-related disclosures than similarly sized peers to maintain a deposit in a segregated account from which withdrawals would be subject to FINRA’s approval, adhere to specified conditions or restrictions on the operations and activities of the member firm and its associated persons, or comply with a combination of such obligations. FINRA would preliminarily identify these member firms by using numeric, threshold-based criteria based on information primarily disclosed through Forms BD, U4, U5 and U6, as applicable.
A copy of the proposed rule change is available here.