The Financial Industry Regulatory Authority has issued a notice setting June 1 as the date it will begin the process of determining which of its member firms will be categorized as restricted firms.
Under FINRA Rule 4111, which took effect on Jan. 1, firms with a significant history of misconduct that are designated as restricted firms are required to deposit cash or qualified securities in a segregated, restricted account and adhere to other specified conditions or restrictions that are in the public interest.
See our previous reporting on this story here.
According to an Information Notice issued last week, June 1 will mark the first “Evaluation Date” under the new rule as FINRA starts to calculate which of its 3,400 broker-dealer firms meet the preliminary criteria to be considered a restricted firm. The authority said it would actually perform the annual calculation at least 30 days after the Evaluation Date, to account for the time between when relevant disclosure events occurred and when firms must report those events on the Uniform Registration Forms.
Rule 4111 is designed to help protect investors from the risks presented by broker-dealers with a history of misconduct and who employ a high percentage of brokers with disciplinary problems.
The rule sets out an annual process in which FINRA decides whether a member firm raises concerns over investor protection that are significant enough to be designated as a restricted firm. The authority expects June 1 to be each year’s evaluation date.
The complete report on FINRA Rule 4111 can be found here.
Financial professionals who work for broker-dealers, RIAs or other financial service companies operate in a highly regulated industry that is overseen by the SEC, state regulators and other self-regulatory organizations such as FINRA and various exchanges. If you are the subject of a regulatory proceeding, contact the FINRA compliance lawyers Lewitas Hyman at (312) 291-4600 or through our online contact form for a free consultation.