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FINRA Announces “Significant” Changes Impacting Brokers and Investors

May 21, 2018 Blog

Along with the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) is one of the primary authorities with oversight of brokers and brokerage firms serving individual investors. FINRA’s role is to protect individual investors, and it does this through means ranging from establishing formal rules for brokers to providing a forum for arbitration of investor disputes.

Recently, FINRA announced a number of “significant” changes to its programs and operations, including several changes intended to “benefit investors, promote compliance . . . [and] enhance transparency.” While FINRA has long been a strong advocate for investors, these are welcome changes that should make it easier for investors to make informed decisions and recover fraudulent investment losses.

Some of the most notable changes highlighted in FINRA’s announcement include:

1. Active Monitoring of Financial Technology-Related (FinTech) Developments

From cryptocurrencies to automated trading apps, technology is rapidly changing the way that investors interact with the market. With technological advances making the industry both more accessible and more complex, so-called “FinTech” presents a number of unique concerns for brokers and investors. To address issues with potential impact for individual investors, FINRA is providing specific FinTech guidance to brokers so that they can (hopefully) help their clients make informed and unbiased investment decisions.

2. Consolidating FINRA’s Enforcement Structure

Previously, FINRA operated two separate enforcement teams focusing on broker misconduct identified through different sources. While this system was largely effective, it also had a number of well-recognized flaws. FINRA has now unified these teams into a single Enforcement Division, which it believes will be better able to, “streamline investigations, share information, enhance consistency and maximize our resources to protect investors and the markets.”

3. Launching the FINRA Small Firm Helpline

While high-profile investment fraud cases tend to involve major banks and brokerage firms, many investors lose money due to fraudulent practices at much smaller brokerages. Although some of these fraudulent practices are undoubtedly intentional, for small firms that do not have fully-staffed compliance divisions, ensuring that brokers meet their obligations to investors can be a challenge. To help these firms – and to help investors as a result – FINRA has launched a Small Firm Helpline where brokers at small firms can get help answering their questions about FINRA compliance.

4. Increasing Funding for Examiners and Regulatory Coordinators

FINRA’s Examiners and Regulatory Coordinators are the individuals who have direct responsibility for ensuring that brokers either meet their obligations to their clients or else face appropriate consequences for non-compliance. In 2018, FINRA will be increasing its funding for these positions, presumably to ensure that it can continue to meet the demands of the constantly-evolving investment industry.

Are You Entitled to Financial Compensation through FINRA?

If you have lost money due to broker fraud or misconduct, you may be entitled to recover your losses through FINRA arbitration. Zamansky, LLC is an investment fraud law firm that represents individual investors nationwide in claims for financial recovery. If you would like to discuss your rights with a FINRA attorney, we encourage you to call (646) 663-5628 or contact us online to schedule a free initial consultation.