The Financial Industry Regulatory Authority is providing member firms with guidance pertaining to its new rule regarding so-called ‘Restricted Firms’, ThinkAdvisor reports.
Rule 4111, which took effect Jan. 1, categorizes restricted firms as those broker-dealers with a significant history of misconduct. They will now be 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.
The rule is designed to help protect investors from the risks presented by broker-dealers who have a history of misconduct and employ a high percentage of brokers with disciplinary problems.
FINRA has now released a list of frequently asked questions designed to furnish members with information they will need about Rule 4111 going forward. The list includes an explanation that the Department of Member Supervision will compute annually for each member firm the preliminary identification metrics to determine if the member firm meets the preliminary criteria for identification to be designated as a restricted firm.
FINRA has said that on June 1 it will begin the process of calculating which of its 3,400 broker-dealer firms meet the preliminary criteria to be considered a restricted firm.
The authority stated the new rule is part of its efforts to enhance programs that address the risk to investors and the broader market from firms and individuals with a history of misconduct.
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 Lewitas and Hyman at (312) 291-4600 or through our online contact form for a free consultation.