April 24, 2021
FINRA just published another unnecessary Regulatory Notice in which the regulator reminds us about what it believes could constitute a violation of its rules. To which many veteran industry regulatory/compliance lawyers and staff would respond: Who gives a crap what FINRA merely believes? If it's a rule, enforce it. If it's an interpretation, publish it. Say what you mean and mean what you say. We can't run Wall Street compliance departments by attempting to read FINRA's mind and divine its beliefs.
Regulators and prosecutors like to exaggerate the nature and extent of their allegations; but let's not pretend that defense lawyers don't participate in similar subterfuge through their own fanciful pleadings. Such is the stuff of our adversary system of justice. When regulators/prosecutors have a settlement to work with, however, things really get blown out of proportion -- such unbridled excess produces settlements in which the sanctions imposed don't appear to fit what is presented to us as another crime of the century. In a recent FINRA AWC, we are left somewhat breathless by a series of seemingly outrageous allegations by the regulator only to be asked to accept what comes off as tepid sanctions.
There are times when FINRA gets it right. The self-regulatory-organization conducts a diligent investigation and finds a violation of its rules. Thereafter, FINRA presents its compelling case to a respondent, but also accepts a fair settlement. That's how it should work. But for the fact that it doesn't always work like that and but for the fact that it doesn't work like that as often as it should. But, okay, let's just stand back for a moment and offer a round of applause to encourage FINRA to do more of the same as demonstrated in a recent settlement involving loans from customers and outside business activities.
With surprising regularity, we have reported about families with a stockbroker, and how such a relationship proves fertile ground for over-reaching or fraud. In a recent FINRA regulatory settlement, we come across the scenario of a mother with an Edward Jones account and her daughter who is not a stockbroker but who is an Edward Jones Branch Office Administrator. Astute readers will likely infer that since this blog is about a "FINRA regulatory settlement" that the daughter took improper advantage of the mother.