November 30, 2020

Volume X, Number 335

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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.

©2020 Katten Muchin Rosenman LLPNational Law Review, Volume X, Number 325
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TRENDING LEGAL ANALYSIS

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About this Author

Susan Light, Katten Law Firm, Finance Law Attorney, New York
Partner

Susan Light focuses her practice on financial services regulatory matters. She counsels broker-dealers, hedge funds, investment banks and financial services clients on enforcement issues involving the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), other self-regulatory organizations (SROs) and state and federal regulatory authorities. She has particular experience related to sales practice issues, financial and operational issues, anti-money laundering, crowdfunding, cybersecurity, and cryptocurrencies.

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212-940-8599
Michael T. Foley, Katten, Lawyer, Finance, FINRA, Chicago
Special Counsel

Michael Foley represents broker-dealers, investment advisers and other financial services industry participants with respect to a broad spectrum of legal and regulatory matters arising under the federal securities laws.

Michael has nearly 20 years of experience in private practice and in-house at both a large, full-service broker-dealer and at an online discount broker-dealer, advising broker-dealers and other financial institutions regarding compliance with the federal securities and commodities laws, and with the regulations of the US Securities and Exchange...

312-902-5452
Jack West Financial Attorney Katten
Associate

Jack West is an associate in the Financial Markets and Funds practice.

312-902-5463
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