August 23, 2019

August 22, 2019

Subscribe to Latest Legal News and Analysis

August 21, 2019

Subscribe to Latest Legal News and Analysis

August 20, 2019

Subscribe to Latest Legal News and Analysis

FINRA Issues Regulatory Notice Supplementing Prior Guidance on Credit for Extraordinary Cooperation

On July 11, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 19-23 (the Notice) to restate and supplement prior guidance regarding the circumstances by which a firm or individual may influence the outcome of an investigation by exhibiting extraordinary cooperation. The Notice incorporates FINRA’s prior guidance and further clarifies how FINRA defines “extraordinary cooperation” and whether a potential respondent’s cooperation rises to such a level, as distinct from the level of cooperation expected of all member firms and their associated persons.

In determining what constitutes extraordinary cooperation, FINRA’s Sanction Guidelines direct FINRA Enforcement to consider whether a respondent:

  1. accepted responsibility for an acknowledged misconduct prior to detection and intervention by the firm or a regulator;

  2. voluntarily employed subsequent corrective measures, prior to detection or intervention by the firm or by a regulator, to revise general and/or specific procedures to avoid recurrence of the misconduct;

  3. voluntarily and reasonably attempted, prior to detection and intervention by a regulator, to pay restitution or otherwise remedy the misconduct; and

  4. provided substantial assistance to FINRA in its examination and/or investigation of the underlying misconduct.

In addition to the factors described above, FINRA states that it may provide credit in the following areas, and provides additional guidance:

  • where there are steps taken to correct deficient procedures and systems;

  • where restitution is made to customers;

  • where violations are self-reported; and

  • where substantial assistance is provided to assist in FINRA investigations.

The Notice further explains that when FINRA determines that a firm should be given credit for extraordinary cooperation, that credit may take many forms ranging from closing an investigation with no further action or with a Cautionary Action letter, to reduced sanctions in an enforcement proceeding.

Finally, the Notice describes FINRA’s efforts to be more transparent about credit for extraordinary cooperation for both firms and individuals.

A full copy of the Notice is available here.

©2019 Katten Muchin Rosenman LLP

TRENDING LEGAL ANALYSIS


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.

...
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 Commission, the US Commodity Futures Trading Commission and financial industry self-regulatory organizations. 

312-902-5452
Associate

Leonard Licht is an associate in the Financial Services practice. He advises a broad range of financial market participants, including investment managers to private funds and investors in private funds. Prior to joining Katten, Lenny practiced as a corporate and securities attorney and has also worked in an analytical capacity with a family office.

While in law school, Lenny was a Heyman scholar and member of the Moot Court Honor Society.

212-940-6587