FINRA takes enforcement of its regulations seriously, even when an alleged violation is unlikely to cause harm to clients. In two recent examples, the financial regulator fined and suspended brokers for actions related to their own private accounts.
Are brokers allowed to have their own accounts?
Yes, but there are rules. FINRA and brokerage firms who hire these professionals generally require brokers to disclose these accounts. With the approval of FINRA and their employer, the broker can keep the accounts.
In these two cases, the regulator claims the brokers intentionally failed to disclose the presence of the accounts. In one of the cases, the broker’s employer, Wells Fargo Advisor, claims the broker neglected to list the accounts on a compliance questionnaire. In addition to failing to disclose the accounts, the regulator also claims the brokers’ actions were in conflict with their requirements that brokers act with commercial honor and just principles of trade — further supporting FINRA’s decision to move forward with penalties for the brokers’ actions.
What are the penalties for this type of violation?
In this case, FINRA suspended the broker from practicing for three months. The regulator also fined the broker $2,500. This was just the start. The allegations also led to the termination of the broker’s position with Wells.
What options are available for brokers and brokerage firms that face similar allegations?
Brokers who believe they are wrongfully accused of a violation when they were actually exercising their rights to participate in a free-market economy are wise to take allegations of a FINRA violation seriously. As shown in the above example, the allegations can result in financial penalties and have a negative impact on your chosen profession.