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FINRA Requires Heightened Supervision over Bad Brokers

FINRA has outlined recommended heightened supervisory procedures for brokers with a history of past misconduct. FINRA suggests that firms should (i) designate a principal with supervision responsibility; (ii) provide specific training to the bad broker; (iii) require written acknowledgements; and (iv) conduct periodic reviews of the plan’s effectiveness.  FINRA also describes certain characteristics of an effective heightened supervisory plan: physical proximity of the supervisor to the broker, ongoing contacts and reviews, frequent monitoring, and expediting customer complaints.   FINRA has also proposed rules that would subject member firms that hire bad brokers to additional FINRA monitoring and reporting.

OUR TAKE: FINRA wants to make it difficult on firms that hire brokers with a disciplinary record by imposing additional regulatory, monitoring and reporting requirements.

http://www.finra.org/industry/notices/18-15

http://www.finra.org/sites/default/files/Regulatory-Notice-18-16.pdf