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Head of SEC enforcement calls for tougher penalties to deter broker misconduct

On Behalf of | Oct 13, 2021 | Securities and Compliance

Broker-dealers were put on notice that they could be facing increased penalties in the future for incidents of misconduct, Advisor Hub reports. Gurbir Grewal, director of the Securities and Exchange Commission’s enforcement division, said the SEC would be examining areas where its fines and penalties have not been sufficient to deter violations.

His comments came at the Practicing Law Institute’s Broker/Dealer Regulation and Enforcement 2021 event last week. Grewal said the SEC would look to devise sanctions that “are not seen as an acceptable cost of doing business,” but instead would be harsh enough to have the intended deterrent effect. “And central to deterrence is proportionality, “ Grewal said. “The worse the conduct, the more strongly we want to disincentivize market participants from engaging in it.”

He added that the tougher penalties might apply to firms committing violations for the first time as well as to repeat offenders. Grewal added that firms could also be penalized for misconduct that did not specifically harm customers, such as not putting in place a reasonable supervisory system or committing violations in record-keeping.

In his speech, he also called for a “proactive compliance approach” in which firms and brokers would not wait for enforcement actions to be taken before they implement the appropriate policies and procedures.

Grewal assumed his position as the SEC’s head of enforcement in July after serving as New Jersey’s Attorney General since 2018.

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