June 5, 2021
FINRA Rule 2010 is applied in a disparate fashion against smaller member firms and the industry's associated persons in contrast to larger FINRA firms and powerful industry interests. For me, Rule 2010 is an overly elastic, rubbery bit of nonsense that gets stretched to fit the misconduct of the little guys but just never seems to get pulled around the big boys. As such, Rule 2010 is a lovely bit of aspirational regulation, but, in truth, it's a joke. As things tend to work out under Rule 2010's shadow, the small fry get expelled and barred for their transgressions of the industry's purported standards and principles; however, when the big boys screw up, FINRA tends to find mitigation and cooperation and explanations, and, well, you know, self-regulation looks quite different depending upon whether you're looking through the prism of the powerful versus the powerless.
Veteran litigator Nancy Hendrickson has fought it out in the trenches when it comes to employment disputes. As Nancy sees it, FINRA's expungement process isn't exactly a square deal for the men and women trapped within that system -- pointedly, it is costly and time-consuming. So, when FINRA proposed some dubious revisions to its expungement rules and PIABA hectored for more of the same, Nancy felt the need to champion the industry's hundreds of thousands of employees.
A recent FINRA regulatory settlement sanctioned a supervisor's alleged failure to "restrict" a trader's "market access." But as the facts emerged, that trader didn't exactly follow compliance policies and engaged in subterfuge to hide his tracks and cover up his trades. All of which raises questions as to whether the supervisor was victimized by the trader and an over zealous regulator. Unfortunately, there just doesn't seem to be a satisfactory answer to that seminal question, which leaves the supervisor in an uncomfortable posture.