The SIPA

 Last month, FINRA reported two unrelated settlements of disciplinary actions against member firms noting its imposition of lower fines after taking into consideration, among other things, each firm’s limited revenues and financial resources.  Indeed, FINRA reported 13 similar settlements in 2012.

 Back in 2006, NASD modified the General Principles Applicable to All Sanction Determinations portion of the NASD Sanction Guidelines (the “Guidelines”) to clarify that “adjudicators should consider a firm’s size and available resources when imposing monetary sanctions.  In particular, as revised, the Guidelines state that, in determining sanctions for violations that are not egregious and do not involve fraud, adjudicators should take into account a firm’s revenues, as well as other factors indicative of firm size.”  See, NASD Notice to members 06-55. http://www.finra.org/Industry/Regulation/Notices/2006/p017524

Any small firm facing a disciplinary action initiated by FINRA that could result in a monetary fine should ensure that if appropriate, its legal counsel sets forth an argument for a reduced fine while negotiating a settlement.  However, firms also should be aware that the notation of a reduced fine pursuant to NASD NTM 06-55 will appear in the settlement agreement, oftentimes a Letter of Acceptance, Waiver and Consent or “AWC,” FINRA’s monthly and quarterly publications of disciplinary proceedings and the disclosure on the firm’s BrokerCheck report, all of which are publicly available.  That’s just the cost of doing business, as they say.

Author:  Dianne L. Trenholm, Esq., SIPA member and attorney with Taylor English Duma LLP in Atlanta, GA.  Dianne has over 15 years of representing broker-dealers and investment advisers and can be contacted atdtrenholm@taylorenglish.com or (678) 336-7144 with any questions or comments.